More than a quarter of UK tax revenue generated in London

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The budget makes everyone focus on how the tax burden falls on individuals, but what does it look like as a national picture? New research has developed a tax map of Britain that reveals where the money is generated, and it reveals the importance of cities, particularly London, in generating the country’s tax take.

In 2013/14 London generated £126 billion in tax, that’s a quarter of all the economy taxes generated in the country. Other cities generated £182 billion and non-urban areas £170 billion.

The Centre for Cities, a policy institute, looked at what is referred to as economy taxes. These include taxes on labour, such as income tax and national insurance; tax on consumption, in other words VAT; taxes on land and property, such as stamp duty and council tax; and taxes on investment. These make up 87% of the UK tax revenue and exclude things like duty on alcohol and tobacco. The total for economy taxes generated in the UK is £478 billion.

London produces 26% of the economy taxes, twice as high as it’s share of population, which is around 13%. And some London boroughs make an even more startling contribution. The City of London and Westminster generate £44 billion in tax, almost a tenth of all revenues.

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Much of London’s contribution is driven by the very high tax raised per worker through income tax and national insurance. London levels are much higher than those across the country and in the City of London are 3 times higher than average urban levels.

tax per worker

The borough of Tower Hamlets includes the financial services centre of Canary Wharf.

The Centre for Cities assigned taxes on labour to the location of the work not the home residence of the worker, hence the City with a small number of residents and a high numbers of workers generates a high level of taxes. Commuters into London account for around 16% of the capital’s tax generated from labour.

The tax mapping also revealed that some London areas have tax raising profiles very different from the national picture. While the City is dominated by labour taxes, a large proportion of Kensington and Chelsea’s contribution is made up of land and property tax.

tax profiles

This is a product of the high cost London property market and is predominantly stamp duty. London accounts for more than 40% of the stamp duty in the UK and Kensington and Chelsea along with neighbouring Westminster contributed 32% of the capital’s stamp duty in 2013/14.

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