The Centre for Tax Analysis (CenTax) published a research briefing on 24 September 2026 revealing that only one in ten individuals with incomes above £150,000 pays an effective marginal tax rate close to the statutory 47% (45% Income Tax + 2% NICs). Using anonymized HMRC administrative data, the study finds the median effective marginal rate for this group is 38.2%, with the bottom quartile paying below 30%. The gap is attributed to extensive use of salary sacrifice, pension contributions (benefiting from 45% relief), share-based remuneration taxed at Capital Gains Tax rates, and non-domiciled remittance basis claims. The research reignites debate on the progressivity of the UK tax system ahead of the Autumn Budget.
Key Takeaways
- Pension Tax Relief as Primary Driver: High earners diverting income into pensions—where contributions receive 45% relief but withdrawals are taxed at lower marginal rates in retirement—account for an estimated 60% of the effective rate reduction.
- NICs Structural Avoidance: The 2% additional NICs rate above £50,270 is avoided through employer pension contributions (no employer/employee NICs) and share schemes, creating a regressive kink in the NICs curve.
- Policy Options: CenTax models three reform paths: (a) restricting pension relief to basic rate (yielding £14bn), (b) applying NICs to pension contributions (yielding £9bn), (c) aligning CGT rates with Income Tax (yielding £6bn)—each with significant behavioral and political trade-offs.
Disclaimer: This article is compiled and summarized by the AI based on publicly available information and is for general information purposes only. It does not constitute any form of formal tax advice, legal opinion, or basis for performance. Please consult a qualified professional tax advisor or legal counsel for tax advice.
Source: Read Official Announcement