The richest 1% in Britain have become increasingly concentrated in London over the past two decades, according to research that underlines the rise of inequality between the capital and the rest of the country.

The Institute for Fiscal Studies said London had increased the proportion of top 1% highest income tax payers who live there by a fifth since the early 2000s, marking a growing concentration of income.

Finding that the top 1% highest earners in the country are overwhelmingly middle-aged men living in London and the south-east, the thintank said the super-rich bunching together could distort their views on wealth.

Robert Joyce, deputy director at the IFS, said: “This geographic and demographic concentration may be one reason why many of those on high incomes don’t realise quite how much higher their incomes are than the average.”

In a sign of the capital’s rising affluence compared with other parts of the country in the years since the turn of the millennium, London’s share of the top 1% had risen to 35% in 2014-15 from 29% in 2000-01.

More than half of the country’s top 1% live in London and the south-east, clustering together in as few as 65 parliamentary constituencies, compared with 78 at the start of the 2000s.

The findings come amid growing concerns over the rise of inequality in Britain over recent decades. Coupled with austerity and stagnant wage growth after inflation for average workers, inequality is viewed as being among key drivers for the country’s polarised political debate and among the reasons for the Brexit vote.

Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk

The IFS said it took an income of about £100,000 to be considered among the top 1% of high earners in Wales, the north-east and Northern Ireland. However, in London it was more than £300,000 a year.

In a sign of the extreme levels of wealth in the capital, it said a 50-year-old man in London with an income of £160,000 would earn enough to be in the top 1% for the rest of the country, but would not even be in the top 5% of men living in London.

Men make up 83% of the top 1% of income tax payers and 89% of the top 0.1%. To be among the top 1% of men requires an income of £200,000, while to be in the highest 1% income bracket for women would need half of that.