Income from shares dwarfs his salary as PM
Rishi Sunak earned almost £5 million in the past three years, according to a summary tax return released while Westminster focused on Boris Johnson.
In the middle of a long hearing into whether Johnson misled the Commons, Sunak became the first prime minister since David Cameron to publish a tax return. It showed that his income from shares dwarfed his ministerial salary. The prime minister received more than £4 million from a US-based investment fund over three years, most of which was taxed at only 20 per cent.
The summary return has little detail on the sources of the fund’s income and does not include the income of his wife, Akshata Murty, who is believed to be much richer.
Almost all of Sunak’s wealth is held in a US-based investment fund, which he put into a “blind management arrangement” when he entered the cabinet in 2019 to avoid conflicts of interest. The fund has not paid money directly to Sunak during the period in question and he has indicated that he will not cash it out until after he leaves office.
Most of Sunak’s income came from share sales, with £1.6 million in capital gains reported last year and £172,415 in dividend payments. Capital gains are taxed at 20 per cent, whereas the overall tax rate on his other income was 37 per cent. In total Sunak paid £432,493 in UK taxes last year.
Dan Neidle, founder of Tax Policy Associates, a think tank, pointed out that the tax rate on most of Sunak’s income was far lower than tax and national insurance rates paid by “a high-earning employed person” such as a banker or surgeon. “In paying capital gains tax at 20 per cent, Sunak is doing nothing remotely wrong or improper, but it’s hard to justify this disparity and it’s in Sunak’s gift to end it,” he said.
Downing Street said it was “entirely routine for savers to choose to invest in funds that focus on long-term growth rather than short-term dividend income. The tax return clearly shows that a considerable amount of capital gains tax is being paid.”
Sunak also claimed £59,921 in deductions on his UK tax for tax he had already paid in the US. He received $344,318 in US dividends over three years, on which he paid a total of $51,648 tax. Sunak also paid £3,244 tax on interest from a US high street bank account over three years.
His accountants insist that Sunak pays taxes as a UK resident and received no tax benefits from the US residency he held while chancellor, the revelation of which threatened to derail his political career last year.
“We can confirm that your previously held Green Card status did not impact your tax liability in either the UK or the USA during this period. This is because you were considered non-resident for US tax purposes. Therefore, the only income or gains that were taxed in the USA were the US source dividend,” Evelyn Partners wrote.
SIMON WALKER/NO 10
Allies also pointed out that Sir Keir Starmer had yet to release his own tax return despite a promise to do so in January. None of Sunak’s three predecessors, Boris Johnson, Liz Truss or Theresa May, published their tax returns while prime minister. Cameron was the last to do so in April 2016, showing £75,898 of income tax on an income of £200,307, paid in 2015.
Sunak and his wife are estimated to have a combined wealth of £730 million and revelations that she previously held non-dom status seriously dented his leadership ambitions. She went on to commit to paying UK tax on all her worldwide income. Sunak has also faced accusations that he is a beneficiary of tax haven trusts, but there is no mention of this in his tax summary.
A big bill, but not that big
Tax experts have said that the prime minister, who yesterday made good his promise to release his tax documents, is paying the same effective tax rate as someone earning a salary of £40,000 a year (Lily Russell-Jones writes).
The publication of Sunak’s return showed that he paid a £432,493 tax bill for the 2021-22 tax year. However, the statement shows the prime minister received over £1.97 million from his income, capital gains and dividend payments.
Tax analysts have been quick to point out that this means Sunak paid an effective tax rate of 22 per cent on his total earnings and gains.
“A basic-rate taxpayer earning £40,000 a year would pay a similar effective tax rate as the prime minister through their income tax and national insurance contributions. This is mainly because capital gains are charged at a lower rate of tax than income,” Nimesh Shah, of the accountancy firm Blick Rothenberg, said.
A nurse on a salary of £37,000 a year would pay an effective tax rate of 21 per cent on their salary, says the advocacy group Tax Justice UK. This is because £4,884 would be taken as income tax and £2,931 would be taken in national insurance payments. “The system is designed to allow wealthy people to pay lower rates of tax,” said Robert Palmer, from Tax Justice UK. “Someone like Rishi Sunak who gets the bulk of their earnings from capital gains and dividends pays a much lower rate of tax on those earnings than you would pay on income from work.”
The majority of Sunak’s income was from capital gains (profits made from the sale of most assets) which are taxed at a lower rate than income from employment.
Everyone benefits from a tax-free personal gains allowance of £12,300 a year. Above this threshold gains are taxed at 10 per cent if you are a basic rate taxpayer and 20 per cent if you are a higher rate taxpayer.
Revelations about the non-dom status of Sunak’s wife jeopardised his leadership ambitions last year
DAVID M BENETT/GETTY IMAGES
In the 2021-22 tax year Sunak earned a salary of £156,163 as an MP and chancellor of the exchequer, a role which he held until July 2022. About £1.6 million came from capital gains and almost £330,000 from dividend payments.
Sunak’s income from capital gains and dividends came from a US based investment trust which is classed as a “blind management arrangement,” his tax statement shows. “These are structures that are quite commonly used by ministers. Essentially they are used to avoid any potential conflicts of interest because the investor — in this case Sunak — does not have any control over what is invested in by the trust,” said Shah.
Sunak’s tax bill would not have meant he joined this year’s Sunday Times Tax List, which ranks the top 100 UK taxpayers. Alexander Marr and family, whose wealth comes from a business that catches and trades fish, is 100 on the list and paid £10.7 million last year, which shows the prime minister is a long way from being included in his own right.
Source: The Times
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