Introduction
Since its inception in 2004, the TaxPayers’ Alliance has been highlighting the impact of taxation on the public and businesses. Now, the impact of the tax burden comes alongside sustained high levels of inflation. Inflation for December 2023 stood at four per cent,[1] double the Bank of England’s target of two per cent. That is down from a high of 11.1 per cent in October 2022.[2] Interest rates too are at a significant 5.25 per cent, the highest rate since January 2008.[3] All of this is adding to cost of living pressures for households across the country, through higher bills for essential goods, mortgages and rent.
As the TaxPayers’ Alliance has raised, the tax burden is at a 70 year high,[4] and on course to be the highest on record.[5] Over a working life, households will pay various taxes including direct taxes such as income tax and national insurance contributions as well as indirect taxes like value added tax (VAT), alcohol duty and television licenses.
This note estimates the total amount of tax paid by different types of households over a lifetime. For the purposes of this note, a lifetime is defined as 60 years, which assumes 45 years in work from 21 years old to the state pension age of 66,[6] and 15 years in retirement. The data is provided in quintiles to show the impact of taxation across a range of household income groups. The note also tracks the historic rates of lifetime tax to illustrate how the amount of tax paid over a lifetime has changed.
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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,[7] and over 10,000 to cover the cost of the UK’s 2022 foreign aid spending.
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[1] Office of National Statistics, Consumer Price Inflation, UK: January 2024, 14 February 2024, www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/january2024, (accessed 22 February 2024).
[2] Ibid.
[3] Bank of England, Interest rates and Bank Rate, www.bankofengland.co.uk/monetary-policy/the-interest-rate-bank-rate, (accessed 16 January 2024).
[4] Taxpayers Alliance, Taxpayers’ Alliance Finds Average Tax Level Is Highest In 70 Years, 2021, www.taxpayersalliance.com/taxpayers_alliance_finds_average_tax_level_is_highest_in_70_years, (accessed 12 January 2024).
[5] Office for Budget Responsibility, Public finances databank – December 2023, 23 December 2023, obr.uk/data/,
(accessed 16 January 2024).
[6] Age UK, State Pension, www.ageuk.org.uk/information-advice/money-legal/pensions/state-pension/,
(accessed 16 January 2024).
[7] Office for National Statistics, How the population changed in Greenwich: Census 2021, 28 June 2022,
www.ons.gov.uk/visualisations/censuspopulationchange/E09000011/, (accessed 22/02/2024).