New Research: Tax and Benefit Distribution

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

  • TaxPayers' Alliance analysis shows the families on the lowest incomes pay a higher percentage of their gross income in tax than any other income group,and any increase in VAT would only make the situation worse

  • However, the top 10 per cent of earners pay an average of £30,023 more in tax than they receive in state benefits or services

  • The average household paid £274 more in taxes than they received in benefits and services

  • Regional analysis suggests high levels of geographical redistribution of wealth, with London paying the biggest bill and the North East enjoying the most services

The analysis, compiled from Office of National Statistics data and written by Research Director Alex Wild, 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.

Key findings of the report include:

Net effects of taxes and benefits

  • The top 10 per cent of households pay an average of £30,023 more in tax than they receive in cash benefits and benefits in kind such as education and the NHS

  • Before taxes and benefits, the most well-off households had an average income 27 times higher than the households on the lowest incomes, but after tax and benefits this falls to 5.8 times higher

  • The average household paid £274 more in taxes than they received in benefits and services


  • The poorest households paid an average of 47 per cent of their gross income in taxes, the highest percentage of any income group


  • The poorest households of households received an average of £7,961in benefits in kind, compared to the top 10 per cent who received £4,980

  • The third lowest 10 per cent of households received an average of £4,912 in non-contributory benefits, more than the bottom and second-bottom deciles

Regional Breakdown

  • The average household in London, the South East, East of England, South West and East Midlands 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 £3,175 more in benefits and benefits in kind than they paid in taxes, whereas in London households paid £4,119 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 fair, and we need radical reform as well as necessary savings if the way we tax and spend is to become fit for purpose."

All parties should commit to:

1. 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

2. Bringing down, not hiking, VAT

3. Reduce the rate at which "sin taxes," which hit the poorest hardest, are levied

4. Resist calls to introduce further taxes on the highest earners

5. Address the deficit through bringing spending down, rather than through further taxes


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