Average household will pay over £1.2 million in tax in a lifetime

Embargoed: 00:01 Monday 4th March 2024

• TPA analysis of ONS data reveals the lifetime tax bill for average households reached over £1.2 million in 2021-22. The poorest households will work 23 years to pay off their tax bill, leaving 22 years of income for themselves.
  
  
• Average households are set to pay £587,760 in income tax alone over a lifetime, even before thresholds were frozen in April 2021.
  
  
• The TPA are campaigning for a cut to income tax and for thresholds to be unfrozen at the budget on 6th March.

Landmark 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 Rishi Sunak 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.”   

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

Media contact:

Elliot Keck
Head of Campaigns, 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. The TPA at 20 is a series of releases based on previous research produced by the TaxPayers’ Alliance during its 20 year history.
   
   
4. The TaxPayers’ Alliance is campaigning for a cut to income tax.