Treasury figures reveal extent of tax avoidance

Six per cent of the UK's wealthiest individuals earning more than £10 million pay less than 10 per cent in tax, widely speculated figures released by the Government have revealed.

A further three per cent are paying below the basic 20 per cent rate, with fewer than three quarters paying more than 40 per cent.

The figures for the 2010/11 tax year reveal the extent at which some top earners are exploiting tax loopholes to reduce the rate of tax they pay on income - often below the average being paid by those on low and middle incomes.

Of the 10,000 people who declared an income in the range of £1 million to £5 million, around 1,000 paid 30 per cent tax, far below the top tax rate of 50 per cent that they are legally obliged to pay.

The publication of the figures follows recent criticism over Government plans to limit tax reliefs on charitable donations, with many charities concerned the move will damage philanthropic giving.

A Treasury spokesperson said: "There are currently millionaires paying a lower tax rate than ordinary taxpayers. This is the system we have at the moment, but the government is committed to making it fairer."

"We're capping benefits and these figures clearly show why it's fair to cap tax reliefs for the wealthy as well."

Describing the figures as 'shocking', Brendan Barber, general secretary for the Trade Union Congress (TUC), said: "For too many of Britain's super-rich, tax is something for the little people."

"Unfortunately the government is making the mistake of trying to deal with tax reform in a piecemeal way - one day rewarding the very wealthy with a cut in their tax rate, the next trying to unpick their allowances that benefit charitable institutions.

"Instead what we need is a proper and comprehensive review of our tax system - one that sets out to make tax fair for everyone and means the super-rich start to pay effective tax rates much higher than the seemingly voluntary rates they pay at the moment."

Under the proposed changes which are set to come into force in April 2013, all uncapped income tax reliefs will be limited to 25 per cent of an individual's income, or £50,000, whichever is the greater - including relief on charitable donations.

The government is to now launch a formal public consultation regarding the tax relief limit over the summer, saying it is keen to 'explore' the ways in which a cap will work.