Analysis from the TaxPayers’ Alliance (TPA) has revealed that the
average household will pay over £1.2
million in tax in their lifetime, meaning they
would have to work for 19.5 years just
to pay off the taxman. The research is the first part of a series
of papers celebrating 20 years since the group was founded in
2004.
Even before froze income tax thresholds at
April 2021 levels, the average family would pay
almost £588,000 in income tax over
their lifetime. This is alongside
nearly £214,000 in employee and
employer national insurance contributions
and £182,000 in VAT, although this
does not account for the recent 2p cut to national insurance.
Previous TPA research found that the number of people paying
income tax has surged by 4.5 million since 2010, with more than
half of the increase coming since thresholds were frozen.
Meanwhile the bottom 20 per cent of households, or families with
a household gross income of £19,599, will work for
almost 23.4 years to pay off their
lifetime tax bill, the longest of any group. The lifetime tax
bill for the top 20 per cent of households, or families with an
income of £144,685, would be £2,962,905 in direct and indirect
taxes, which would take them 20.5 years to pay off.
The figures show that the average lifetime tax bill has only
fallen on four occasions since 1977. During the covid pandemic,
the lifetime tax bill briefly fell from £1.2 million to £1.1
million.
The research also shows it would take more
than 290,000 average households’ total
lifetime taxes to pay for the £360
billion cost of covid. Taxes taken throughout the
working lives of over 10,000 households would cover just a single
year of the foreign aid budget, even at the reduced rate of 0.5
per cent of gross national income.
With the tax burden at a record high, the TaxPayers’ Alliance is
calling on the chancellor to unfreeze tax thresholds and cut
income tax to bring down families’ lifetime tax bills.
CLICK HERE TO READ THE
RESEARCH
Key findings:
- An average household during their lifetime - 45 working years
and 15 years in retirement - will
pay £1,238,760 in direct and indirect
taxes (in 2021-22 prices). The average lifetime tax has almost
doubled in real terms from the amount of tax the average
household paid in 1977.
- The average gross income for a household in 2021-22 was
£63,431. This means that the average household would have to
give 19.5 years’ worth of gross income
to cover a lifetime’s worth of tax.
- Households in the bottom 20 per cent by income will
pay £458,535 in taxes over a lifetime.
The average gross income of those in the bottom 20 per cent of
households was £19,599 in 2021-22. Accordingly, it would take
over 23 years to pay off their tax
bill.
- The top 20 per cent of households in the UK will
pay £2,962,905 in taxes over a
lifetime. The average gross income for these households was
£144,685. For the highest earners, paying off their lifetime tax
would take over 20 years.
- The average lifetime tax has fallen on only four occasions
from the previous year since 1977. These were: 2002-03; 2008-09;
2012-13; and 2020-21.
- An average household over a lifetime will
pay £587,760 in income
tax; £181,590 of
VAT; £173,235 of employee’s national
insurance contributions; £91,230 of
council tax; and £40,350 of employers’
national insurance contributions.
- It would take 290,613 average household lifetime taxes to pay
for the cost of the covid pandemic, more than the entire
population of Greenwich, and over 10,000 to cover the cost of the
UK’s 2022 foreign aid spending.
CLICK HERE TO READ THE
RESEARCH
John O’Connell, chief executive of the TaxPayers'
Alliance, said:
“Taxpayers are spending almost half their working lives just
to pay off the taxman, with most families comfortably tax
millionaires.
“And since thresholds were frozen, this situation will almost
certainly have got worse, as more and more households are dragged
into higher rates of tax.
“The chancellor must use the budget to bring down the
lifetime tax bill, by cutting income tax and unfreezing
thresholds.”
