ANALYSIS: Poorest households now lose majority of their income to tax

For immediate release

Fresh analysis of Office for National Statistics (ONS) data released today shows that the poorest households now pay almost 57 per cent of their income in tax, the highest proportion of any group.

The ONS data shows that for the lowest income households, total tax as a percentage of gross income has increased by almost 13 percentage points from the previous year, up from 44 per cent. The rise is largely driven by income tax, which makes up around a quarter of their total tax bill and almost quadrupled from £523 per household in 2018-19 to £1,947 per household in 2019-20. The total tax bill for the poorest households is now estimated to be £8,264 per year. 

With taxpayers already facing the highest sustained tax burden in 70 years and covid-19 hitting working households hard, the TaxPayers’ Alliance is calling on the chancellor to cut taxes on the poorest, to offer a respite from these rises and help them recover from the crisis.

Key findings in the ONS data:

• For the bottom income decile, the average gross income was £14,547 per household. Direct and indirect taxes for this group averaged £8,264.
  
  
• The bottom decile paid the largest proportion of their income in taxes at 56.81 per cent.
  
  
• VAT took up 14 per cent of the bottom decile’s gross income and 25 per cent of the total taxes paid. This was the highest proportion of any group.
  
  
• 14.17 per cent (£1,171) of taxes paid by the bottom decile was for council tax, with only those in the second lowest decile paying a higher proportion (14.41 per cent).
  
  
• Income tax accounted for 13 per cent of the poorest’s gross income and 24 per cent of the total taxes paid by the bottom decile.
  
  
• Alcohol duties cost the poorest 1.32 per cent of their gross income in 2019-20.
  
  
• Similarly, TV licences take up a far higher proportion of the taxes paid by the poorest at 1.38 per cent in 2019-20, compared to 0.18 per cent for the top decile.

Responding to the analysis of today's ONS figures, John O'Connell, chief executive of the TaxPayers' Alliance, said:

“It’s not just the pandemic that’s punished the poorest, but relentless tax rises too.

“Struggling families have been battered by endless hikes and now face losing 57p of every pound they earn to the taxman. 

“Hard hit households need tax cuts to ease the burden and help them recover from this crisis.”

TPA spokesmen are available for live and pre-recorded broadcast interviews via 07795 084 113 (no texts)

Media contact:

Danielle Boxall
Media Campaign Manager, TaxPayers' Alliance
[email protected]
24-hour media hotline: 07795 084 113 (no texts)

Notes to editors:

1. Founded in 2004 by Matthew Elliott and Andrew Allum, the TaxPayers' Alliance (TPA) campaigns to reform taxes and public services, cut waste and speak up for British taxpayers. Find out more at www.taxpayersalliance.com.
   
   
2. TaxPayers' Alliance's advisory council.
   
   
3. TaxPayers’ Alliance research has revealed the average tax burden has reached a 70 year high.
   
   
4. The TaxPayers’ Alliance has launched a petition to stop council tax rises.