Income tax accounts for about a third of all taxes received by HMRC. When combined with National Insurance, Capital Gains Tax and Bank Payroll Tax, these make up about 55% of all UK taxes. The amount of total tax paid to HMRC rises almost every year. In 2000/01 the total stood at £315,642m in the last tax year 2018/19 it had nearly doubled to £619,367 over 18 years.
THE UNION AND TAXES
In the tax year 2016/17 for those of you interested the total tax raised was £568,603m of which 87.2% was raised in England, 3.3% was raised in Wales, 7.4% raised in Scotland and 2.1% raised in Northern Ireland.
WHO PAYS INCOME TAX
In 2017 the UK population was about 66million. Not everyone pays income tax (children, sick, unemployed, not employed and choosing to not “work”). In practice about 40% of the population pay income tax (they may well pay other taxes, but so do the 40%). In the 2016/17 tax year, there were 26.3m income tax payers in the whole of the UK. Of these 15.1m were male and 11.2m were female. 20.9m were under 65 and 5.39m were 65+.
HOW MUCH INCOME TAX DID THEY PAY?
In the 2016/17 tax year (the most recent with the data analysis). There was £174,000million paid in income tax by 26.3m individuals. So thats about 30% of all the taxes paid were from these income tax payers. In the tax year concerned we basically have 4 categories of income taxpayer, those that simply pay the savings rate, those that pay basic rate (20%), higher rate (40%) and additional rate (45%).
As a reminder, in 2016/17 the personal allowance was £11,000 (the amount you can earn without paying income tax). This is reduced once your income is £100,000 at the rate of £1 for every £2 of income over £100,000. So anyone with an income of £122,000 has no personal allowance – all their income is taxable.
In terms of taxable income, the first £32,000 was taxed at 20%, from £32,001 – £150,000 tax is 40% and anything above £150,000 is taxed at 45%. Here is what happened.
As you can see from the table above, 81.75% of basic rate (20%) income taxpayers paid £57,300million in tax. You will remember Pareto’s law 80/20? Well its not far off, just over 80% of income taxpayers (83.78%) pay about 33% of the income tax bill. The next, smaller group, nearly 15% of the income taxpayer population of 40% taxpayers pay rather more between them – 37.3% of the total income tax bill. The smallest group (1.25% of taxpayers) those paying 45% income tax rates pay 29.6% of the total bill.
So whilst it is only part of the story – higher rate and additional rate taxpayers pay 66.9% of the income tax bill. Yet they only make up 16% of the income taxpayer population.
DO YOU WANT TO TAKE A POP AT THE 1%?
I am not supporting any political position here. I am simply making the statement that factually, if you pay income tax of 45% you are the 1%. As such you contribute a huge proportion of the total income tax bill. In exchange you have no personal allowance and probably a reduced pension allowance of £10,000 – less than an ISA. Let me also remind you that an income of £150,000 does not make you a millionaire…
If you fancy having a pop at the “millionaires”, taking the same data but just considering Additional Rate Taxpayers. There are 16,000 people with incomes of £1m+ (0.06% of income taxpayers) pay 8.79% of total income tax collected. So I will leave this here for you to mull over.
I have taken all this data from published HMRC and ONS documents that you can easily search and check yourself.
You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email firstname.lastname@example.org