Keir Starmer’s tax return reveals he paid higher rate than Rishi Sunak last year

Rate effectively charged on Labour leader’s income 10 percentage points higher than on prime minister’s, analysis shows

Sir Keir Starmer was effectively taxed at a rate of nearly 32 per cent in the past financial year, while the prime minister, a multimillionaire, paid tax in effect at just over 22 per cent, analysis by The Independent shows.

The Labour leader earned £126,154 in salary as an MP and leader of the opposition, on which he paid £43,103 in income tax, according to his newly published tax return for 2021-22.

He also earned nearly £85,000 in capital gains from the sale of a house that he helped his sister to buy. On that, he paid £23,930 in tax.

It brought his total tax bill to £67,033 on £211,620 of income – effectively giving him an overall tax rate of 31.67 per cent, The Independent has calculated.

Sir Keir published his tax return a day after Rishi Sunak’s was released – which coincided with Boris Johnson’s dramatic appearance before the privileges committee to try to save his political career.

Mr Sunak made more than £1.9m in the 2021-22 financial year – nearly nine times more than Sir Keir. It included £1.6m in capital gains and more than £300,000 in earnings and investment income, his own tax return revealed.

The prime minister, whose gains largely came from a US-based investment fund, paid £432,493 in tax in all on his income.

That works out at an effective tax rate of 22.73 per cent, despite his being a higher-rate taxpayer.

Sir Keir paid capital gains tax at 28 per cent – the rate charged on residential property, whereas Mr Sunak paid capital gains tax at 20 per cent – the rate on other assets.

Both are less than the 40 per cent rate of tax charged on employment for higher earnings, so dragged down their overall effective tax rates.

Even before the discrepancy between the two leaders’ effective tax rates was revealed, tax expert Dan Neidle questioned whether capital gains should be taxed less than employment income.

Mr Neidle said Mr Sunak’s effective rate of tax was far lower than if most of his earnings had been from employment.

The prime minister was paying an effective rate of 22 per cent “not because he has done anything clever or because he is avoiding tax, it is because in this country we tax employment income at up to 47 per cent but capital gains on investments at only 20 per cent”, he said.

Earlier Sir Keir swerved a question on whether the capital gains tax rate should be reviewed.

Mr Sunak similarly avoided questions about his tax return, saying: “Ultimately what people are interested in is what I’m going to do for them, and you talk about the cost of living – of course that’s the number one priority that I’m grappling with.”

Jacob Rees-Mogg, the former business secretary, said Mr Sunak’s earnings showed he was “the sort of person we want running our country”.