UK taxpayers’ income tax bill has doubled since millennium

The annual income tax paid by the public has doubled over the past two decades, according to data from HM Revenue & Customs.

In fiscal year 1999-2000, £ 93 billion was paid in income tax. By 2018-19, the latest year for which figures are available, that figure had risen to £ 187 billion. HMRC predicts that number will reach £ 199 billion by 2021-2022.

More people were also drawn to the tax system during the period, according to the data. While there were 27.2 million taxpayers in 1999-2000, this figure had risen to 31.6 million people in 2018-19.

The number of taxpayers is expected to increase further, reaching 32.2 million people in 2021-2022, due to population and employment growth as well as the recent government freeze on income tax thresholds .

Bad news for top earners, the strongest growth is expected among additional taxpayers, who pay income tax at 45 percent in England, Wales and Northern Ireland and 46 percent in Scotland.

The HMRC estimated that there will be 440,000 additional taxpayers in 2021-2022, up 10.3% from 2018-2019. This compares to a 2.6% increase in the number of base rate taxpayers to 27 million in 2021-22 – but a 2.4% drop in higher rate taxpayers to 4.13 million.

Sarah Coles, personal finance analyst at investment broker Hargreaves Lansdown, said tax threshold too, so the proportion of people paying higher tax rates has declined.

“Unfortunately, things are expected to get a lot darker over the next few years. Freezing the personal allowance and the higher rate tax threshold means that more people will pay more taxes and the number of higher rate taxpayers will increase again. “

The number of additional rate taxpayers has jumped as the threshold has been frozen at £ 150,000 since its introduction in 2010-11. “As average total incomes increase, more and more people become eligible for the additional rate,” HMRC said.

The economic impact of the Covid-19 pandemic is likely to have reduced the number of taxpayers, the tax administration added. He suggested that estimates for coming years were more uncertain due to the pandemic and might be more likely to change than estimates for previous years.

Nonetheless, tax experts have previously warned that more people will be subject to basic and higher tax rates by April 2026, following Chancellor Rishi Sunak’s decision to freeze the personal allowance in his budget. in March.

Sunak has confirmed that the personal allowance that people start paying income tax to will remain at £ 12,570 until April 2026, rather than increasing with inflation as has been the case for several years. .

At the time, the independent Office for Budget Responsibility predicted that the changes would put 1.3 million people in net income tax by 2025-2026 and lift 1 million taxpayers into the top tax bracket. higher.

To avoid paying too much tax, Coles suggested people make full use of their tax breaks, including pensions and individual savings accounts (Isas), which allow savers to make tax-free deposits.