Beat UK’s £199 Billion Income Tax Bill

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Beat UK’s £199 Billion Income Tax Bill
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  • There were 31.6 million income tax payers in 2018/19, and there will be 32.2 million in 2021/22, as a combination of employment and population increases alongside the freeze in the personal allowance.

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  • In 1999/2000 we paid £93 billion in income tax. This rose to £187 billion in 2018/19 and is expected to hit £199 billion by 2021/22.
  • There will be 27 million basic rate taxpayers in 2021/2022, which is a 2.6% increase from 2018/2019. They’ll make up 83.2% of income taxpayers.
  • There will be 4.13 million higher rate taxpayers in 2021/2022, which is down 2.4% from 2018/2019. They’ll make up 13.1% of income taxpayers
  • There will be 440,000 additional rate tax payers in 2021/2022, up 10.3% from 2018/2019.

HMRC has issued statistics on income tax.

The £199 Billion Income Tax Bill

Sarah Coles, personal finance analyst, Hargreaves Lansdown:

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“The government is going to take £199 billion of our hard-earned money in income tax in 2021/22, more than twice the sum it took in 1999/2000.

We’ve had a few years of more positive news for higher earners, because the personal allowance has been rising gradually, and we’ve seen a bump in the higher rate tax threshold too, so the proportion of people paying higher rate tax has dropped.

Unfortunately, things are set to get far grimmer for the next few years. The freeze in the personal allowance and higher rate tax threshold means more people will pay more tax, and the number of higher rate taxpayers will grow again. By 2021/22 it will still be below its 2018/19 level, but it’ll soon be back over it again.

And while we’re happy to pay our fair share of tax, we can’t afford to pay over-the-odds. So it’s worth considering some simple steps to protect your income from tax.

ISAs can protect income from investments from tax. If you’re saving to buy a first property and are aged 18-39, you should also consider a Lifetime ISA, because in addition to tax free growth, you get a 25% bonus on contributions.

Contributions to pensions, meanwhile, attract tax relief at your highest marginal rate, and the first 25% taken from the pension is usually tax-free. There’s tax relief on pensions even for non-taxpayers – on the first £3,600 a year.

In some cases, the government will let you give up a portion of your salary, and spend it on certain things free of tax (and in some cases national insurance). This includes pensions, childcare vouchers, bike-to-work schemes, and technology schemes.

And you can take advantage of the spouse exemption that means assets that produce an income can be passed between spouses without triggering a tax bill. They can therefore be shared between a couple, so that both take advantage of their allowances. The balance can be held by the spouse paying the lower rate of tax, to reduce the tax payable.

Other Figures In This Release

  • In 2018/19, 42.7% of taxpayers were women (13.5 million), and 57.3% are men (18.1 million). At the time, 49.8% of the population over the age of 16 was male.
  • For 2020/21, this is expected to become even more unbalanced, as women make up 42.5% of taxpayers and men 57.5%, as the number of male taxpayers rises more quickly.
  • In 2018/19 6.5 million taxpayers (20.6%) are over the state pension age. They made up 22.9% of the population at that point.
  • Basic rate taxpayers will pay an average of 9.5% of all their income in tax. For higher rate taxpayers it’s 22% and for additional rate taxpayers 38.1%
  • In 2018 to 2019 the bottom 50% of income taxpayers paid 9.5% of total tax, whilst the top 50% paid 90.5%. In 2021 to 2022, the bottom 50% of Income Taxpayers are expected to pay 9.4%, and the top 90.6%.

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