Who are the 1% in Britain and are you one of them? (2024)

A concern that too much money is flowing to a small elite of the population, combined with people’s natural inclination to suspect others are being paid more than them has been a defining feature of the decade since the financial crisis.

Those two concepts are nothing new, but a bunch of extremely rich people crashing the global economy, demanding to be bailed out, and then making out like bandits on the subsequent decade of cheap money has an uncanny ability to sharpen the mind.

Amid that scenario, the profile of the 1 per cent has risen.

This is the label given to those who make up the wealthiest in society, but despite its widespread use it is often ill-defined.

To that end, the latest piece of the Institute of Fiscal Studies’ research into inequality in the UK looked at who are the 1 per cent, how much does it take to get into that bracket, and are some earning so much that even within that single per cent there is a great disparity?

This only looked at income not wealth - which is what perhaps matters more - but for those of us who enjoy a bit of geekery it made for interesting reading.

The IFS looked at income tax records up to 2016 to dig into the 1 per cent, because ‘the richest members of our society get a lot of attention… but the picture we have of this group is often rather patchy or anecdotal’.

There are about 540,000 people in the top 1 per cent income bracket across the UK and that requires £120,000 a year, the IFS said.

But in order to drill down further, it chose to focus solely on income tax payers: they made up 31 million of the UK’s 54 million adults in 2015, and that raises the 1 per cent bar to a personal taxable income of £162,000.

To put those figures in context, an income of £51,000 was enough to make the top 10 per cent of UK earners, while the median was £22,000.

This creates a distortion that explains a great deal about the abundance of stories of people earning more than double the national average who don’t feel particularly rich.

As the IFS said: ‘If you are at the 90th percentile, you may well feel more like the person at the median (21.6 million adults below you in the distribution) than the person at the 99th percentile (just 4.9 million people above you).’

Dig deeper though and you can understand why if you’re in the 1 per cent it can feel equally tough to keep up with the Joneses.

To be halfway up the 1 per cent pecking order and make the 99.5th percentile required an income of £236,625.

Cracking the 99.9th percentile and breaking into the exclusive 0.1 per cent club required £648,205 per year.

While I doubt too many people will be feeling sorry for anyone in the 1 per cent, the IFS made an interesting comment on this.

‘The difference in income between the median and the 90th percentile is barely even discernible when set against the differences within the top 1 per cent’, it said.

Those differences are nothing though compared to drilling down into age, gender and location.

Only 17 per cent of the top 1 per cent of earners across the UK are women, up from 12 per cent in 2001.

Further up the scale, women make up just 10 per cent of the top 0.1 per cent.

Meanwhile, London and the South East account for 25 per cent of tax payers, but 60 per cent of the 1 per cent.

To make the top 1 per cent as a man you needed an annual income of £200,000, whereas a woman needs just over £100,000.

The hardest age bracket to make it into the 1 per cent for both sexes was between 45 and 54, where men needed just over £300,000 and women about £140,000.

The location where you can make the 1 per cent with the lowest income was Wales, at £100,000, while in the South East people needed £200,000 and in London just over £400,000.

Again this will explain the phenomenon of people in London and the South East, who are by national standards very high earners, on perhaps £90,000 a year, but don't feel like they are when they look at the lives of some of those around them.

The most extreme example of exclusivity is for men aged 45 to 54 in London, where £722,000 was needed to make the 1 per cent club.

You could be a man of this age in London earning £100,000 and still feel like Ronnie Corbett in the famous 'I look up to him' Ronnie Corbett, Ronnie Barker and John Cleese sketch.

Someone cracking the top 1 per cent nationally with £162,000 per year wouldn’t even make the top 5 per cent for men in that age bracket in London.

Most of the money earned by the 1 per cent comes from employment, at 59.2 per cent, but this is a considerably lower share than for those further down the ladder for whom it PAYE income makes up a much larger chunk of their income.

The bulk of the rest of the 1 per cent’s income comes from partnerships, at 17.7 per cent, dividends at 11.3 per cent, self-employment at 3.6 per cent and pensions at 2.5 per cent.

Of course, it’s also worth noting that the top 1 per cent pay a lot of tax. They rake in about 12 per cent of all the UK’s taxable income but pay 27 per cent of income tax.

In addition, the 1 per cent are now earning less on average than they were in the Blair / Brown years before the financial crisis.

Nonetheless, the gulf even within that top 1 per cent indicates why there is such concern about inequality and people paying their way.

There is a chunk of people in modern day Britain, the CEO, City-type, law firm partner, investment manager class, for whom even the 0.1 per cent threshold of £648,205 per year won’t sound like much.

At a time when there’s talk of 'for the many not the few' and higher taxes to tackle inequality, there’s a suspicion that it will be the merely very well paid in PAYE jobs who will get forced to cough up, while those on millions a year will continue to manage to pay proportionally much less.

Any attempt to tackle inequality needs to go after not just those it's easy to make pay more - the top 10 per cent and 1 per cent, but also ensure the 0.1 per cent and above pay their fair share. That's where the real money is at.