The tax burden hits the poorest hardest

August 14, 2015 12:20 AM

New analysis by the TaxPayers' Alliance suggests that Britain's tax system is neither progressive nor balanced across different income groups.

The analysis, compiled from Office of National Statistics data, demonstrates that much of the rhetoric around "lifting people out of taxation" or "ensuring that those with the broadest shoulders bear more of the burden" is based more on perception than reality. The honest truth is that consumption and property taxes continue to hit the poorest families hardest, whilst the top 10 per cent of earners pay in far more to the Treasury than they receive through state services.

Read the full analysis here

Key findings of the report include:

Net effects of taxes and benefits

  • The top 10 per cent of households paid an average of £28,685 more in tax than they received in cash benefits and benefits in kind such as education and the NHS in 2013-14
  • Before taxes and benefits, the most well-off households had an average income 27.4 times higher than the households on the lowest incomes, but after tax and benefits this fell to 6.1 times higher
  • The average household paid £462 more in taxes than they received in benefits and services, a significant increase on 2012-13 when the figure was £274


  • The poorest households paid an average of 45 per cent of their gross income in taxes in 2013-14, the highest percentage of any income group, representing a slight decrease from 47 per cent in 2012-13


  • The poorest households received an average of £6,816 of benefits in kind, compared to the top 10 per cent who received £5,150. The third-lowest ten per cent of households received the most benefits in kind (£8,176)
  • The top ten per cent of households received an average of £391 in non-contributory cash benefits, compared to £3,623 for the lowest ten per cent and £5,191 for the third-lowest ten per cent, again the most of all income deciles

Regional Breakdown

  • In 2013-14, the average household in London, the South East, East of England and the South West paid more in taxes than they received in benefits and services. All other regions, including Scotland, received more in benefits and services than they paid in taxes
  • Households in the North East of England received an average of £2,934 more in benefits and benefits in kind than they paid in taxes, whereas households in the South East paid £3,662 more in taxes than they received in benefit and benefits in kind

Tax Impact

  • The poorest 10 per cent of families pay by far the largest proportion of their gross income in taxes
  • This is mostly due to indirect taxes such as VAT, Council Tax, fuel duties and duties on alcohol and tobacco
  • VAT is the most burdensome tax for households in the lower half of the income scale, whilst Income Tax is the most burdensome for the upper half

Jonathan Isaby, Chief Executive of the TaxPayers' Alliance, said:

"This analysis shows how pernicious our tax burden has become. Not only does the tax system hit the poorest hardest, but those at the top are already contributing far more than anybody could reasonably describe as their "fair share." Our tax system is neither progressive nor reasonable, and the government must stick to its spending targets so that the radical reform we need can finally happen."

The Government should:

1. Stick to their spending target
2. Bring National Insurance thresholds in to line with Income Tax, to lift the lowest paid out of earnings taxes and as a first step towards the abolition of National Insurance
3. Reduce the rates of VAT while broadening the base
4. Reduce the rate at which "sin taxes," which hit the poorest hardest, are levied
5. Resist calls to introduce further taxes on the highest earners

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