Number of UK millionaires drops 16%

The number of people in the UK earning more than £1m per year has dropped from 19,000 in 2015/16 to 16,000 in 2016/17, with the introduction of the EU bankers’ bonus cap playing a key role, according to UHY Hacker Young

One of the factors driving the fall in the number of £1m earners has been the introduction of the EU bankers’ bonus cap, which came into effect in the UK in January 2015. The cap limits bonuses to 100% of salary, where bonuses worth several times investment bankers’ base salaries were once commonplace.

The bankers’ bonus cap resulted in the number of people in the UK investment banking industry earning €1m or more falling 15% to 3,500 in 2016 from 4,100 in 2015, according to data from the European Banking Authority. The number did not recover in 2017, reaching just 3,550.

The fall in £1m earners forms part of an overall decline in high earners in the past year, with the number of people in the £500,000 plus and £300,000 plus income brackets also falling.

The firm says that the rise of the technology industry as a major driver of economic growth has resulted in more people in the UK earning more than £1m per year through sales of businesses, rather than through traditional salary and bonuses.

The fall in £1m plus incomes also suggests that even before the Brexit vote, the UK economy was already struggling for momentum.

While there are only 16,000 people who make more than £1m per year in the UK, they pay 35% of all income tax – a total of £15.3bn in 2016/17.

Mark Giddens, partner at UHY Hacker Young, said: ‘The UK has seen a drop in the number of high earners – and that is even before Brexit makes an impact. These numbers also point to the fact that the economy has now been stuttering for several years. The potential impacts of Brexit on that could not come at a worse time. The Treasury relies on high earners to pay tens of billions of pounds in income tax each year.

‘An increasingly common method of becoming a millionaire these days is for tech entrepreneurs to build and exit a businesses. That isn’t ‘income’ in the strict sense, it’s a capital gain, so that huge wealth creation won’t show up in these figures. So while investment banking might not be creating millionaires on the same scale it once did, tech has replaced it to an extent.’

Report by Amy Austin

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