Workers Pay Higher Tax Than Their Landlords

A graduate earning £35,000 a year pays almost double the average tax of someone with the same income from rent on property, according to a study of inequality in the UK tax system.

- Phillip Inman

The combined effect of income tax and national insurance payments forces people in employment to pay much higher rates of tax than those who benefit from lower capital gains tax (CGT) rates on property and shares income, according to the Intergenerational Foundation think tank.

In a separate example that also emphasises the gap between the mainly older people who generate an income from property and shares and those who rely on employment, a person receiving £60,000 a year in the form of capital gains or dividends pays less tax than someone aged 16 to 64 in a job earning £35,000.

"Earned income, in such cases, is taxed two to four times more heavily than unearned income," said the foundation, an independent charity that funds research into issues affecting young people, in a new report.