UK tax system is ‘very progressive’, says Sunak

Rishi Sunak has insisted the UK’s tax system is “very progressive” as he brushed off questions about his own financial affairs.

The Prime Minister paid an effective rate of around 22% on his substantial income because the majority came from capital gains rather than earnings.

But Mr Sunak insisted the tax system was fair for lower earners, many of whom had been taken out of tax as a result of threshold increases since the Tories came to power in 2022.

The Prime Minister made nearly £2 million through income and capital gains in 2021/22.

His income from dividends was £172,415, and from capital gains was £1.6 million.

For that same financial year, he paid £432,493 in tax. Asked if the 22% effective rate on his income was fair, Mr Sunak told reporters: “Well, actually, what we’ve done is taken lots of those on the lowest pay out of paying any tax at all, because of the threshold increases, both for income tax and National Insurance.

“So if you look at real earnings: for those on the lowest pay over the last decade, what you’ve seen is that they’ve grown almost by 25%, in real terms after inflation over that period.

“So actually where our tax policy has been particularly focused is on those on the lowest incomes, and you can see that in their take-home pay over the past decade, since 2010.”

Pushed on the fairness question, given that the top rate of income tax is 45%, Mr Sunak said: “We have a very competitive tax system that has one of the highest national living wage rates in the Western world combined with the highest personal tax allowances in the G20, last time I checked.

“Which means those on the lowest incomes can earn more than anywhere else without paying a penny in tax. So actually it’s a very progressive tax system that we have in the UK.”