Around £11bn a year could be raised from an Alternative Minimum Tax rate based on the total amount of income and capital gains that a person reports before applying any deductions or reliefs.
This is according to new research from the London School of Economics (LSE) and the University of Warwick, which analysed the anonymised personal tax returns of every UK resident who received more than £100,000 a year in income or capital gains and discovered that many are paying extremely low tax rates, lower even than people on modest incomes.
According to LSE, one of the most striking findings is that those receiving £10m effectively paid just a 21% tax rate on average.
This is driven by large variation in rates even amongst the very rich, with some paying close to the headline rate on earnings of 47% and others paying just 11%: lower than people earning £15,000.
LSE said that with Covid-19 placing “unprecedented demands” on public spending, tax rises appear “inevitable”.
LSE said: “A key choice is between increasing taxes that affect almost everyone – VAT, National Insurance Contributions, the basic rate of Income Tax – versus targeting tax rises on the richest.
“But the rich, it is often pointed out, already pay a lot of tax: a frequently cited statistic is that the top 1% pay nearly 30% of all income tax. Is it fair, or even possible, to require that they pay more?”