ONS: Poorest Households Pay 57% of Income in Tax, Higher Rate Than for Middle Class

Analysis of ONS data by the Taxpayers’ Alliance finds 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%. 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.

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%
  • VAT took up 14% of the bottom decile’s gross income and 25% of the total taxes paid. This was the highest proportion of any group.
  • 14.17% (£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%).
  • Income tax accounted for 13% of the poorest’s gross income and 24% of the total taxes paid by the bottom decile.
  • Alcohol duties cost the poorest 1.32% 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% in 2019-20, compared to 0.18% for the top decile.

With taxpayers already facing the highest sustained tax burden in 70 years and covid-19 hitting working households hard, the TaxPayers’ Alliance’s John O’Connell is calling on the chancellor to cut taxes on the poorest

“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.”

It is surely immoral for the government to take the majority of your income. Levelling up must mean cutting taxes, start with the TV licence tax which takes more than ten times the proportion of the income of the poorest compared to the richest…

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