Accredited official statistics

Bulletin - Commentary

Published 29 June 2023

Introduction

About This Publication

This publication is the annual update of the Income Tax Liabilities Statistics. This commentary presents information from Tables 2.1 to 2.6, providing detailed statistics on the most recent outturn data and projected estimates of individual Income Tax payer numbers, Income Tax liabilities and average rates of Income Tax. The most recent outturn data is for 2021 to 2022 and is collected from the Survey of Personal Incomes (SPI) and is presented alongside projected estimates for the 3 subsequent tax years. The SPI is based on information held by HMRC on individuals who could be liable to UK Income Tax. It is carried out annually by HMRC and covers income assessable to tax for each tax year.

Additional supplementary information is published that accompanies this release, which includes:

• accompanying statistical data in Tables 2.1 to 2.6
• Supporting Documentation including context and background information, data sources, methodology, quality indicators and a glossary of terms

New in this release

This release of the Income Tax Liabilities Statistics publication includes the finalised outturn data for the 2021 to 2022 tax year collected from the SPI. In addition, it includes revised projections for tax years 2022 to 2023 and 2023 to 2024 and the first projection estimates for the 2024 to 2025 tax year. The estimates for tax years beyond 2021 to 2022 are projected from the new 2021 to 2022 SPI outturn data using economic assumptions consistent with the Office for Budget Responsibility’s (OBR) March 2024 Economic and Fiscal Outlook.

This release reflects all Income Tax policy changes up to and including the 2024 to 2025 tax year. This includes changes made by both the UK and Scottish Governments following the devolution of Income Tax rates and bands (except the Personal Allowance, which remains reserved) that apply to Scottish Income Tax payers’ non-savings, non-dividend income.

The publication continues to be published in an accessible format in line with government guidance on publishing accessible content.

Tables 2.1 to 2.6 are provided in an open file format, while the Commentary and Supporting Documentation are published in HTML.

Impacts of the coronavirus pandemic (COVID-19)

The Income Tax liabilities statistics for tax years 2020 to 2021 onwards include estimates of the knock on impact of COVID-19, and, more specifically for this publication, on individual’s incomes and Income Tax liabilities. The COVID-19 impact and the impact of policy measures put in place as part of the Government’s response, for example the Coronavirus Job Retention Scheme, are incorporated both into the SPI outturn for 2020 to 2021 and 2021 to 2022 as well as into the economic assumptions on which these statistics are based.

The statistics presented in this publication for projection years 2022 to 2023, 2023 to 2024 and 2024 to 2025 are uncertain and are likely to change by a greater degree than would normally be expected during future revisions.

The impact of COVID-19 on individual incomes and Income Tax liabilities are discussed in the relevant sections of this document.

Table 2.1 – Number of individual Income Tax payers by marginal rate, sex and age

Table 2.1 provides data on the number of Income Tax payers between 1990 to 1991, when independent taxation for all individuals was introduced in the UK, and 2024 to 2025. The Income Tax payer population is broken down by marginal rate of Income Tax, sex, and age. Income Tax payers are classified by their highest marginal rate of Income Tax, which is the rate that an extra pound sterling of income would be charged at. Savers and basic rate Income Tax payers are all considered ‘basic’ rate Income Tax payers as no Income Tax is due at the higher or additional rate. From 2018 to 2019, Scottish Income Tax payers with non savings non dividend (NSND) income in the starter rate and intermediate rate are considered ‘basic’ rate Income Tax payers, and the Scottish NSND higher and top rates are grouped with all other Income Tax payers in the higher and additional marginal rate bands respectively, despite having different rates. From 2024 to 2025, Scottish Income Tax payers with NSND income in the advanced rate are considered ‘additional’ rate Income Tax payers. Further details on marginal Income Tax rate can be found in Annex B of the Supporting Documentation.

Please see Table 2.1a for historic years before 1990 to 1991.

Income Tax payer population

The 2021 to 2022 outturn data shows there was an estimated 33.0 million Income Tax payers in 2021 to 2022. This is an increase of 1.29 million Income Tax payers when compared to 2020 to 2021 which is expected to be driven by the low level of indexation in 2021 to 2022 alongside income growth that leads to an increase in individuals liable for Income Tax. The total number of Income Tax payers is projected to rise to 37.4 million in 2024 to 2025, mainly due to population and employment growth. This increase is even larger because of the freeze to the Personal Allowance in 2022 to 2023 through to 2024 to 2025, which when combined with income growth results in this increase in the Income Tax paying population. The overall number of Income Tax payers from tax year 1990 to 1991 through to 2024 to 2025 can be viewed in Figure 1.

Income Tax payer numbers in 2020 to 2021 and 2021 to 2022 are affected by the economic impacts of COVID-19, which will also likely lead to residual impacts for future years. Whilst the latest data from the 2021 to 2022 Survey of Personal Incomes has been used as the basis for the projections, it is anticipated that there will be some changes resulting from methodology updates and changing SPI (see Introduction for further information).

Figure 1: Number of individual Income Tax payers between 1990 to 1991 and 2024 to 2025

Income Tax payers by age and sex

In 2021 to 2022, 14.5 million (43.9%) Income Tax payers were female and 18.5 million (56.1%) were male. Comparatively, for mid-2021 the Office for National Statistics (ONS) population estimate found that just 48.4% of the UK population aged 16 and over were male, suggesting men are overrepresented in the Income Tax payer population whilst women are underrepresented. For the tax year 2024 to 2025, projections show that 16.9 million (45.1%) Income Tax payers are estimated to be female, 20.5 million (54.9%) are male, and 8.51 million (22.8%) are above the state pension age. A comparative view of the ONS population estimates and the statistics presented here can be found in Table 2.1, with proportions demonstrated in Figure 2.

Published estimates for 2021 to 2022 indicate there are 6.74 million Income Tax payers (20.4%) over the state pension age. The ONS population estimate for mid-2021 instead found that 21.6% of the population who were 16 or over were of state pension age, indicating that this demographic are underrepresented in the Income Tax payer population. For this publication, the state pension age is set as 66 years for both sexes in the 2021 to 2022 tax year, and in the subsequent tax years through to 2024 to 2025 inclusive.

Figure 2: Income Tax payer populations in 2021 to 2022 by age and sex, compared to mid-2021 Office for National Statistics population estimates

Income Tax payers by marginal rate

In 2021 to 2022, 607,000 individuals (1.8%) were ‘savers rate’ Income Tax payers, meaning they had no taxable earnings but had taxable savings and/or dividends (see Glossary). In addition, there were 27.4 million (83.2%) basic rate Income Tax payers, 4.43 million (13.4%) higher rate Income Tax payers, and 520,000 (1.6%) additional rate Income Tax payers.

Figure 3: Income Tax payer population by marginal rate of Income Tax

In 2024 to 2025 it is estimated that 469,000 individuals (1.3%) will be savers rate Income Tax payers, indicating a 0.6 percentage point decrease in the proportion of people paying Income Tax at this rate compared to 2021 to 2022. In this same period, while there is a projected rise in the number of basic rate Income Tax payers in 2024 to 2025 to 29.5 million (78.8%), this is a decrease when compared to 2021 to 2022 in the proportion of people paying Income Tax at this rate by 4.3 percentage points. Further, in 2024 to 2025, the higher rate Income Tax paying population is expected to undergo a 3.5 percentage point increase from 2021 to 2022 in the proportion of people paying Income Tax at this rate to 6.31 million (16.9%). The increase in this taxpaying population is largely due to the higher rate threshold being frozen in 2022 to 2023 through to 2024 to 2025 at the 2021 to 2022 level and the earnings growth in the middle and higher end of the income distribution. This results in the proportion of higher rate Income Tax payers increasing from 13.4% to 15.7% in 2022 to 2023, and then increasing to 16.6% in 2023 to 2024 as a greater proportion of the population again become eligible for higher rate taxation. Although, the impact of the higher rate threshold freeze is slightly offset by the lowering of the additional rate threshold in 2023 to 2024 which brings some higher rate taxpayers into paying the additional rate. In 2024 to 2025 the number of higher rate taxpayers increases further to 16.9%.

In addition, there are projected to be 1.13 million (3.0%) additional rate Income Tax payers in 2024 to 2025, an increase of more than double from 2021 to 2022. The additional rate threshold was frozen at £150,000 since it was introduced in 2010 to 2011 until 2022 to 2023 inclusive. Therefore, as average total incomes increase more individuals become liable for the additional rate, which explains the steady increase in additional rate Income Tax payers from 2021 to 2022 until 2022 to 2023. However, from 2023 to 2024 onwards the additional rate threshold will be reduced to £125,140, meaning a greater number of individuals become liable for the additional rate and explains the larger increase from 2022 to 2023 to 2023 to 2024 of an additional 363,000 Tax payers (0.9 percentage point increase).

From 2017 to 2018 the Scottish Government have had the power to set the rates and thresholds applying to all non-savings non-dividend Income Tax paid by Scottish Income Tax payers (except for the Personal Allowance). The assumptions around how a Scottish Income Tax payer is identified and how their marginal rate is allocated are detailed in Annex B of the Supporting Documentation.

Please note the numbers in Table 2.1 may not sum due to rounding.

Table 2.2 – Number of individual Income Tax payers by country and region

Table 2.2 is a collection of tables that provide a breakdown of the number of individuals with positive Income Tax liabilities (Income Tax payers) across different UK countries and Government Office Regions. Each table provides the number of Income Tax payers for a given region, subset by marginal rate of Income Tax, sex, and age. Marginal rate is the rate of tax that an extra pound sterling of income that would be charged at.

An Income Tax payer’s country and region are determined by residential postcode. Projections of Income Tax payer numbers by country and region beyond the 2021 to 2022 outturn are based on economic outturn data and forecast assumptions applying to the UK as a whole and should be regarded as indicative, they do not account for geographical variations in economic or population trends and the regional splits shown have had UK growth rates applied to them (see the Supporting Documentation for further details).

Please see Table 2.2a for historic years before 1999 to 2000.

Income Tax payers by country and region

Income Tax payer numbers by region in 2020 to 2021 and 2021 to 2022 are affected by the economic impacts of COVID-19, which will also likely lead to residual impacts for future years.

Figure 4 shows the number of basic rate and higher and additional rate Income Tax payers in each country and region in 2021 to 2022. In 2021 to 2022, the largest proportion of Income Tax payers resided in the South East (14.6% of the total), followed by London (13.1%) and the North West (10.6%). Northern Ireland had the lowest proportion of Income Tax payers (2.5%) of all the countries and regions, followed by the North East (3.7%) and Wales (4.5%). Approximately 1% of Income Tax payers either resided abroad or their address was unknown, and these individuals are not included in Table 2.2.

Figure 4: Number of Income Tax payers by country and region

Higher and additional rate Income Tax payers

In 2021 to 2022, the UK has 4.9 million higher and additional rate Income Tax payers. There were 4 regions where the proportion of higher and additional rate Income Tax payers exceeded the UK average of 15.0%: London, which had 24.8% of the total, the South East which had 19.3%, the East of England which had 16.8% and Scotland which had 16.6%. By contrast, the regions with the least representation of higher and additional rate Income Tax payers were Wales with 9.0%, Northern Ireland with 9.1% of the total, and the North East with 9.4%.

The Scottish higher rate threshold (see Glossary) was increased with CPI indexation in 2021 to 2022 to £43,662 and then frozen in 2022 to 2023, 2023 to 2024 and 2024 to 2025. As a result of no above-indexation increases to the higher rate threshold as well as income growth, the combined number of higher and additional rate Scottish Income Tax payers is projected to increase in each of these years.

Table 2.4 – Shares of total income (before and after tax) and Income Tax for percentile groups

Table 2.4 shows how the distributions of income and Income Tax liabilities have changed between 1999 to 2000 to the current tax year. Income distribution provides one measure of income inequality, while the shares of total Income Tax liabilities reflect the progressivity of the Income Tax system. The table also shows the income breakpoints for each percentile group, meaning the point at which the next percentile group begins. Table 2.4 does not provide a complete picture of individual income inequality in the UK due to the exclusion of those who don’t pay Income Tax, and because the SPI records only include incomes that are assessable for tax (for example, a range of non-taxable social security benefits, some tax credits and non-taxable savings from ISAs are not included).

Income Tax payers are ranked based on total income assessable for tax (earnings, savings and dividend income) before any deductions and tax allowances (such as pension contributions), and then divided into percentile groups ranged on income. For projection estimates for tax years 2022 to 2023 onwards each income component is grown at the same rate for all individuals in each projection year except for pay, where differential earnings growth across the pay distribution is consistent with past trends and includes the impact of forestalling from previous policy changes (for more details see the section on projection estimates in the Supporting Documentation).

Shares of incomes before and after Income Tax, and shares of total Income Tax liability estimates in 2020 to 2021 and 2021 to 2022 are affected by the economic impacts of COVID-19, which will also likely lead to residual impacts for future years. These shares and future projections of them include impacts from wage growth, as outlined by the OBR’s March 2024 Economic and Fiscal Outlook.

Income distribution

Figure 5 shows that Income Tax payers’ total income before tax grew from £533 billion in 1999 to 2000 to £1,300 billion in 2021 to 2022 and is projected to reach £1,620 billion by 2024 to 2025. The top 10% of Income Tax payers accounted for around a third (35.1%) of all income before Income Tax in 2021 to 2022, the top 5% accounted for around a quarter (25.9%), and the top 1% accounted for 13.7%. By contrast, the bottom 10% accounted for just 3.5% of all income before Income Tax, the bottom 5% made up 1.7%, and the bottom 1% made up just 0.3%.

In 1999 to 2000, income inequality between the bottom and top 50% of Income Tax payers was highlighted by a 52.4 percentage point difference in their share of total income before tax: the bottom 50% had 23.8% whilst the top 50% had 76.2%. Inequality by this measure grew in the years leading up to the 2008 recession, showing a 55.8 percentage point difference in 2007 to 2008 (77.9% for the top 50% compared to 22.1% for the bottom 50%). Since then, income inequality has continually decreased, returning to 1999 to 2000 levels by 2011 to 2012 and declining thereafter up to 2019 to 2020. In 2021 to 2022 there was a 50.4 percentage point difference in share of total income before tax, and this measure of income inequality is expected to increase to 51.5 percentage points in 2024 to 2025. This is in part driven by the wage growth in the top 50% in 2021 to 2022 where income inequality increases 1.4 percentage points from 2020 to 2021. It is important to note that the population of Income Tax payers used in these calculations differ each tax year due to variations in the number of individuals liable to Income Tax, which depends in part on Income Tax policy measures at that time. The freeze in the Personal Allowance in 2022 to 2023, 2023 to 2024 and 2024 to 2025 will have impacted the taxpayer numbers, bringing more people into paying tax. Shares of total income would differ if non-Income Tax payers were included.

Figure 5: Shares of total income for bottom and top 50% of Income Tax payers (ranged on total income)

Share of Income Tax liabilities

Total Income Tax liabilities were £93 billion in 1999 to 2000, growing to £226 billion in 2021 to 2022 and are expected to reach £301 billion by 2024 to 2025.

In 2021 to 2022 the bottom 50% of Income Tax payers were liable for 9.2% of total tax, whilst the top 50% were liable for 90.8%. The top 10% of Income Tax payers were liable for around 61.8% of total Income Tax, while the top 1% were liable for around 30.7%. In comparison, the bottom 10% were liable for 0.4% of total Income Tax and the bottom 1% were liable for a negligible share. The shares of total Income Tax for each percentile group can be viewed in Figure 6.

Each of the top income percentile groups (25%, 10%, 5% and 1%) see an increase in their share of Income Tax liability in 2021 to 2022. This is a result of disproportionately larger income growth at the higher end of the pay distribution in 2021 to 2022. In 2022 to 2023, the share of Income Tax liability of the top income percentile groups decreases, and in 2024 to 2025, the share in Income Tax liability remains lower than 2021 to 2022.

The peak in shares of Income Tax liabilities at the top end of the distribution in 2021 to 2022, and subsequent fall in 2022 to 2023, is also due to the freeze in the higher rate threshold and Personal Allowance meaning that there were more Income Tax payers overall in these years, changing the distribution among percentile groups.

In 2024 to 2025 Income Tax payers in each of the bottom percentile groups (those in the 1st, 5th, 10th and 25th income percentile groups remain liable for about the same percentage of Income Tax as they did in 2021 to 2022. The bottom 50% of Income Tax payers are projected to be liable for a slightly higher share of total Income Tax in 2024 to 2025 than 2021 to 2022 at 9.5% and 9.2% respectively. The top 50% of Income Tax payers are projected to be liable for a slightly lower share of total Income Tax in 2024 to 2025 than 2021 to 2022 at 90.5% and 90.8% respectively.

Figure 6: Share of total Income Tax for bottom and top 50% of Income Tax payers (ranged on total income)

Additional rate impacts

Since its introduction in April 2010, the majority of the additional rate Income Tax payer population is composed of the top 1% of Income Tax payers. The share of total income before Income Tax projected to be received by the top 1% of Income Tax payers decreases by 0.4 percentage points to 13.3% between 2021 to 2022 and 2024 to 2025, while their share of total Income Tax decreases by 2.5 percentage points to 28.2%. The highest share of Income Tax to be paid by the top 1% is projected to have been 30.7% in tax year 2021 to 2022. The reduced Income Tax share in 2024 to 2025 compared to 2021 to 2022 is mainly due to the increase in Income Tax payer numbers largely as a result of the Personal Allowance freeze in 2022 to 2023, 2023 to 2024 and 2024 to 2025.

The share of total income and total Income Tax liabilities for the top 1% income percentile group since 1999 to 2000 can be viewed in Figure 7. The introduction of the additional rate in 2010 on taxable income over £150,000 led to a behavioural response by individuals bringing forward, or ‘forestalling’, income in 2009 to 2010. Income forestalling in this year was estimated by HMRC at around £16 billion to £18 billion or 2% of total Income Tax payer income. Details of these effects were set out in a HMRC report published in March 2012. In April 2013, the additional rate was reduced from 50% to 45% which led to the deferral of income from the 2012 to 2013 tax year to the 2013 to 2014 tax year. This resulted in a ‘below normal’ share of income for the top 1% in 2012 to 2013 (compared to if there was no forestalling) and the subsequent increase of this share in 2013 to 2014. The share of income before Income Tax for the top 1% was expected to have returned to a ‘normal’ level in 2014 to 2015. Finally, from April 2023 the additional rate threshold was reduced from £150,000 to £125,140. This tax change was not expected to cause forestalling in additional rate Tax payers, but was expected to cause forestalling in higher rate Tax payers with an income between £125,140 and £150,000, who are trying to avoid the higher tax rate on income in that band in 2023 to 2024.

Figure 7: Share of total income before Income Tax and total Income Tax liability for the top 1% of Income Tax payers (ranged on total income)

The impact of these behavioural responses means that the share of income before Income Tax for the top 1% percentile group displayed more marked variation in this time period, which is outlined below.

In relation to the introduction of the 50% additional rate in April 2010, the share of income for the top 1% was:

• artificially high in 2009 to 2010
• artificially low between 2010 to 2011 and 2011 to 2012 as forestalling unwinds over these years

Then, when the additional rate was reduced to 45% in April 2013, the share of income for the top 1% was:

• artificially low in 2012 to 2013
• artificially high in 2013 to 2014
• returned to normal in 2014 to 2015

In 2023 to 2024, the additional rate threshold was lowered from £150,000 to £125,140. This estimated to have led to a small amount of forestalled income into 2022 to 2023. The share of income for higher rate taxpayers with earnings around the new threshold was:

• artificially high in 2022 to 2023
• artificially low in 2023 to 2024

Dividend tax changes

Another policy change that resulted in a behavioural response and forestalling of income was the abolishment of the dividend tax credit in 2016 to 2017, combined with an increase in dividend tax rates and the introduction of the dividend allowance. The outturn data for 2015 to 2016 through to 2021 to 2022 will show the impact of forestalling in these years (where income was brought forward to 2015 to 2016) (see section on dividend adjustment in Annex B of the Supporting Documentation.

The impact of these estimated behavioural responses means that the top 1% share of income is:

• artificially high in 2015 to 2016
• artificially low in 2018 to 2019 through to 2021 to 2022 as the forestalling continues to unwind over these years. The majority of the unwind effect is captured between 2016 to 2017 and 2018 to 2019

A further policy change that is forecast to drive forestalling of income is the 1.25 percentage point increase in dividend tax rates made in 2022 to 2023. The outturn data for 2021 to 2022 will show the impact of forestalling in this year. Projected estimates for 2022 to 2023 through to 2024 to 2025 have been adjusted to account for estimated income shifting due to the changes to the taxation of dividends (see section on dividend adjustment in Annex B of the Supporting Documentation.

The impact of these estimated behavioural responses means that the top 1% share of income is:

• artificially high in 2021 to 2022
• artificially low in 2022 to 2023 through to 2027 to 2028 as the forestalling continues to unwind over these years

Further notes on the top 1% share

The published years that are unaffected by income forestalling or unwinding are the years leading up to and including 2007 to 2008, and 2014 to 2015. As such, when viewing Figure 6 and Table 2.4 only the tax year 2014 to 2015 can be compared directly with the years preceding the additional rate. For example, the share of total income before Income Tax for the top 1% of Income Tax payers declined from 13.4% in 2007 to 2008 to 12.3% in 2014 to 2015, reflecting the reduction in income inequality between these tax years which are unaffected by forestalling or unwinding.

In contrast, the share of total Income Tax liability of the top 1% of Income Tax payers increased from 24.4% in 2007 to 2008 to 27.2% in 2014 to 2015, indicating that the progressivity of the tax system increased over this period. Factors contributing to this increase in progressivity include:

• the introduction of the additional rate and the Personal Allowance taper
• the lowering of the limits on tax relief on pension contributions
• the above-indexation increase to the Personal Allowance since 2010 to 2011 with the benefits going mainly to basic rate Income Tax payers

Annex B of the Supporting Documentation describes in more detail HMRC’s estimates of behavioural responses to the additional rate of Income Tax.

Table 2.5 – Income Tax liabilities by income range

Table 2.5 provides data on the number of Income Tax payers and their Income Tax liabilities by total income and is grouped by marginal rate of Income Tax, which is the rate that an extra pound sterling of income that would be charged at. Income groups are defined as the lower limit for total income before any deductions, allowances and tax credits. Taxable income is net of these deductions and allowances, which explains why there are Income Tax payers within an income range that is higher than their marginal rate Income Tax band limit (for example, there are some basic rate Income Tax payers within an income range higher than the basic rate limit). Scottish Income Tax payers with NSND income in the starter rate and intermediate rate are considered ‘basic’ rate Income Tax payers. From 2024 to 2025, Scottish Income Tax payers with NSND income in the advanced rate are considered ‘additional’ rate Income Tax payers (see Annex B of the Supporting Documentation for further details).

Income Tax liability amounts include those accrued at other rates of tax, for example total liabilities of higher rate Income Tax payers include liabilities due at the basic and other rates of Income Tax. For each income group, the average rate of Income Tax is calculated as the total Income Tax liability expressed as a percentage of total income. Deductions, allowances and tax credits will vary across individuals within each group, contributing to differences in individual tax rates within groups. An individual’s marginal rate of Income Tax places an upper limit on their average rate of tax due on their total income; average tax rates therefore rise with income towards 45% (or 46% for Scottish non-savings non-dividend Income Tax payers between 2021 to 2022 and 2022 to 2023, rising to 47% in 2023 to 2024 and 48% in 2024 to 2025).

Please see Table 2.5a for historic years before 2021 to 2022.

Number of Income Tax payers by income

In total there were an estimated 33.0 million Income Tax payers in the UK in 2021 to 2022. Of these, an estimated 9.0 million Income Tax payers (27.3%) had total income assessable for tax under £20,000 and 18.6 million Income Tax payers (56.2%) had income from £20,000 to under £50,000. When combined these groups account for 83.5% of all Income Tax payers in 2021 to 2022. In contrast, the number of Income Tax payers with total incomes of £50,000 or more was 5.4 million (16.5%). There were relatively few Income Tax payers with very high incomes, with an estimated 25,000 Income Tax payers with incomes above £1 million, of which 9,000 had incomes above £2 million.

The projected change in the number of Income Tax payers between 2021 to 2022 and 2024 to 2025 across the income range is shown in Figure 8. Income Tax payer numbers are projected to increase across all income ranges over £20,000 by 2024 to 2025, reflecting expected growth in the population, employment rates and incomes. There is a projected increase in the number of Income Tax payers between 2021 to 2022 and 2024 to 2025 with a total income between £50,000 and £100,000 which reflects the wage growth at the higher end of the income distribution. When comparing with the previous published estimate for 2021 to 2022, the current estimates have on average 0.3 million fewer total Income Tax payers in 2021 to 2022. Current projections for 2022 to 2023 align with the previous published estimate, whereas current projections for 2023 to 2024 have 0.3 million more taxpayers when compared with the previous published estimate. This could be partially attributed to the impact of the economic recovery after the COVID-19 pandemic in addition to the more up-to-date outturn data being utilised for the projections.

Figure 8: Income Tax payers by income range for 2021 to 2022 and 2024 to 2025

Liabilities and average Income Tax rates

Liabilities and average Income Tax rates

When looking across marginal rates, the distribution of total Income Tax liabilities shows that in 2021 to 2022, savers and basic rate Income Tax payers made up 85.0% of the Income Tax paying population but were liable for just under a third (31.6%) of all Income Tax (see Figure 9). By contrast, higher rate Income Tax payers made up 13.4% of the Income Tax paying population but were liable for 32.6% of Income Tax, while additional rate Income Tax payers made up just 1.6% of all Income Tax payers but were liable for 35.8% of total Income Tax liabilities. Figure 9: Income Tax paying population and share of Income Tax liabilities by marginal rate

Opposite to the distribution of total Income Tax liabilities across marginal rates, average rates of Income Tax rose with total income up to £500,000; for income ranges above this the average Income Tax rate was around 40% (see Figure 10). In 2021 to 2022, the average Income Tax rate was 5.0% for those with incomes from £15,000 to below £20,000, increasing to 8.9% for incomes from £20,000 to below £30,000 and 12.2% for incomes from £30,000 to below £50,000. For incomes between £50,000 and £100,000 (within the higher rate tax band), the average Income Tax rate rose to 18.7% and then rose to 33.5% for incomes from £150,000 to £200,000 (within the additional rate band). For individuals earning between £200,000 up to but not including £2 million, average Income Tax rates rose to a peak of 40.4%, before falling slightly to 39.3% for incomes of £2 million or more.

Total Income Tax liabilities of those with income up to £15,000 is projected to decrease slightly between 2021 to 2022 and 2024 to 2025 (see Figure 10). Conversely, Income Tax payers with income over £15,000 are expected to have a larger proportion of total Income Tax liabilities in 2024 to 2025 at 98.2%, compared to 97.4% in 2021 to 2022.

The average Income Tax liability across all income ranges is expected to increase by around £1,210, from £6,850 to £8,060 between 2021 to 2022 and 2024 to 2025, largely due to an increase in the amount of Income Tax liable at the upper end of the income distribution. Individuals with income between £15,000 and £150,000 are expected to see an average increase in their Income Tax liability of around £800 over this period, mostly due to an increase in Income Tax payers with higher earnings.

Figure 10: Total Income Tax liabilities and average rate of Income Tax by income range in 2021 to 2022 and 2024 to 2025

The average rate of Income Tax across all Income Tax payers is projected to increase from 17.4% in 2021 to 2022 to 18.6% in 2024 to 2025. Average rates of Income Tax show increases in 2024 to 2025 compared to 2021 to 2022 for those in income groups over £100,000. This is partly due to both the Personal Allowance and higher rate threshold being frozen in 2021 to 2022 through to 2024 to 2025, the reduction of the additional rate threshold from £150,000 to £125,140 in 2023 to 2024, and income growth across all bands meaning there are more Income Tax payers moving into higher earning Income Tax bands that drives up the overall average.

Those with incomes between £15,000 and £20,000 are projected to have the largest decrease in average tax rates of Income Tax from 5.0% in 2021 to 2022 to 4.9% in 2024 to 2025, as they benefit from indexation increases to the Personal Allowance in 2021 to 2022.

Average Income Tax rates for individuals with income below £100,000 are projected to remain relatively stable in 2024 to 2025 compared to 2021 to 2022 with the most marked change in the income groups of £30,000 to £50,000 and £50,000 to £100,000 rising 0.2 percentage points.

For those with incomes between £100,000 and £2 million, average tax rates are projected to increase by between 0.3 and 0.8 percentage points in each income group between 2021 to 2022 and 2024 to 2025. Those with incomes over £2 million had one of the largest increases in average rates of Income Tax from 39.3% in 2021 to 2022 to 40.0% in 2024 to 2025. The increase in average rates of Income Tax at the higher end of the income distribution are in part due to the increase in Dividend rates by 1.25 percentage points in 2022 to 2023, as well as the high income growth at the top end of the income distribution. Such individuals have the Personal Allowance fully withdrawn and therefore do not benefit from its indexation increases but have benefitted from the indexation increase in the higher rate threshold. Most of these individuals will have also had an increase in their average rates of Income Tax from 2023 to 2024 onwards due to the reduction of the additional rate threshold from £150,000 to £125,140.

Table 2.6 – Income Tax liabilities by income source, tax band and marginal rate

Table 2.6 provides data on total Income Tax liabilities by income source (earnings, savings and dividends) and rate of Income Tax. This is provided for all Income Tax payers and for each marginal rate band, which is the tax band that an extra pound sterling of income would be charged at. Income Tax liabilities are classified into three broad sources of income assessable for Income Tax: earnings, savings interest and dividends. Earnings are defined as including pay from employment, profits from self-employment, private and occupational pensions, retirement annuities, state retirement pensions, foreign income, taxable benefits, income from property, and taxable social security income.

Estimates of total Income Tax liabilities for given tax bands include tax accrued on incomes in that band by all Income Tax payers, for example totals for basic rate tax include the liabilities of basic, higher, and additional rate Income Tax payers.

Income Tax liabilities in 2021 to 2022 are likely somewhat lower than they would otherwise have been due to the economic impacts of COVID-19, which would also likely lead to residual impacts for future years. The changes in liabilities and Income Tax payer numbers will have had an impact on the average Income Tax rates in those years as well.

Please see Table 2.6a for historic years before 2021 to 2022.

Income Tax liabilities by income source

In 2021 to 2022, Income Tax liabilities totalled £226 billion of which 92.9% were due on earnings, with a further 6.5% from dividends and 0.6% from savings interest. The total Income Tax liabilities for 2024 to 2025 is projected to be £301 billion, with the proportion from earnings decreasing slightly to 90.6%, the proportion from dividends decreasing to 5.9% and the proportion from savings interest increasing to 3.4%. Income from savings is significantly more in 2024 to 2025 (approximately six times greater than 2021 to 2022), largely due to the actual and forecasted changes in bank and building society interest rates following the large reductions in bank and building society interest rates up to the end of 2021. Dividend tax increases in the 2023 to 2024 tax year, partly due to the 1.25 percentage point increase in dividend rate introduced in 2022 to 2023 and the reduction of the dividend allowance from £2,000 to £1,000 in 2023 to 2024. The increase in the proportion of tax liabilities for savings is due to the very high increase in savings incomes over this period, meaning savings now account for a relatively larger share of Income Tax liabilities than they did previously.

Income Tax liabilities by tax band

In 2021 to 2022, 47.2% of total Income Tax liabilities were due at the basic rate of Income Tax (applying to the first £37,700 of taxable income in that year), compared with 28.8% at the higher rate (taxable income above £37,700 and up to £150,000) and 24.1% at the additional rate. The starting rate for savings is 0% so there are no starting rate Income Tax payers.

The composition of how much Income Tax is liable at each rate is expected to change in 2024 to 2025 compared with 2021 to 2022 is shown in Figure 11. Income Tax liabilities at the basic rate (including at savers rate) are projected to decrease by 2.0 percentage points to 45.2% in 2024 to 2025, while liabilities at the higher rate are projected to decrease by 0.8 percentage points to 28% and those at the additional rate are projected to increase by 2.7 percentage points to 26.8%.

Further, the largest changes to the composition of how much Income Tax is liable at each rate are seen in 2023 to 2024 (shown in Figure 11). There is a large increase in the Income Tax liabilities at the additional rate in 2023 to 2024 compared to 2022 to 2023 of 2.4 percentage points. This is due to the additional rate threshold decreasing to £125,140 in 2023 to 2024, bringing more people into paying the additional rate of tax. The increase in liabilities at the additional rate has decreased the share of Income Tax liabilities at the basic and higher rate. There is also a smaller impact in 2024 to 2025 due to the introduction of an advanced rate of Income Tax for Scottish NSND Taxpayers, announced in the Scottish Budget 2024. The band is classified within the publication at the additional rate (along with the Scottish top rate) and therefore moving more people from paying the higher rate of tax into the additional rate. This decrease in liabilities at the higher rate has slightly increased the share of Income Tax liabilities at the additional rate. Income Tax liabilities at the basic rate (including the savers rate) shows a projected decrease of 0.4 percentage points to 45.2% in 2024 to 2025 compared to 2023 to 2024 at 45.6%. Income Tax liabilities at the higher rate are projected to decrease by 0.4 percentage points to 28% in 2024 to 2025 down from 28.4% in 2023 to 2024.

Figure 11: Proportion of total Income Tax liabilities at basic, higher and additional rate

The low indexation in 2021 to 2022, and the subsequent freeze in the Personal Allowance in 2022 to 2023 through to 2024 to 2025, will contribute to an increase in Income Tax liable at the basic rate. The changes seen at the higher and additional rates suggest a combination of the following:

• the basic rate limit had a small indexation increase in 2021 to 2022, and was frozen in 2022 to 2023 through to 2024 to 2025, resulting in more Income Tax payers paying the higher rate due to income growth
• the additional rate threshold was fixed at £150,000 since its introduction in 2010 up to and including the 2022 to 2023 tax year, resulting in an increase in the number of additional rate Income Tax payers over time as income grew, meaning more Income Tax was liable at that rate - from April 2023 onwards the additional rate threshold was lowered from £150,000 to £125,140 resulting in the number of additional rate Income Tax payers increasing further from this period onwards
• the introduction of an advanced rate announced in the Scottish Budget 2024 moving more people from paying the higher rate of tax into the additional rate of tax
• there is still some residual unwinding of forestalled dividend income liable at the additional rate from income being brought forward in 2015 to 2016 ahead of changes to dividend taxation (see Annex B of the Supporting Documentation) - there is minimal unwinding in the final impacted year, 2021 to 2022, compared to the low level also in 2019 to 2020, meaning there is less of a reduction in dividend income applied to later years. This increases the amount of Income Tax liable at the additional rate in 2022 to 2023 compared with 2019 to 2020
• the introduction of a dividend rate increase in 2022 to 2023 is estimated to have caused a small amount of dividend income to be forestalled into 2021 to 2022 (see Annex B of the Supporting Documentation) - this increases the estimated amount of Income Tax liable at all rates in 2021 to 2022, offset by the first year of unwind in 2022 to 2023 reducing Incomes Tax liable at all rates
• the reduction of the additional rate threshold in 2023 to 2024 is estimated to have caused a small amount of dividend income and pay to be forestalled into 2022 to 2023 (see Annex B of the Supporting Documentation) - this increases the estimated amount of Income Tax liable at the higher rate in 2022 to 2023, offset by an unwind in 2023 to 2024 reducing Income Tax liable at the higher rate

Average rates of Income Tax

As a complement to Table 2.5, average rates of Income Tax by marginal tax rate are also shown in Table 2.6. In 2021 to 2022, average rates of Income Tax are 9.7% for basic rate Income Tax payers, 21.9% for higher rate Income Tax payers, and 38.3% for additional rate Income Tax payers, compared with the tax rates charged on earnings at the basic, higher and additional rates of 20%, 40% and 45%, respectively. The average rates of Income Tax at each marginal rate (meaning the rate applied to the next £1 of income) are lower than the tax rate for that tax band because an Income Tax payer is not charged at that rate on all their income (for example, some is charged at a lower rate or is within an allowance and not subject to Income Tax).

For basic rate Income Tax payers, the average rate of Income Tax is projected to progressively increase from 9.7 percentage points in 2021 to 2022 to 10.1 percentage points in 2024 to 2025. The average rate for higher rate Income Tax payers is projected to decrease by 1.2 percentage points from 21.9% in 2021 to 2022 compared to 20.7% in 2024 to 2025. The average rate for additional rate Income Tax payers is projected to decrease by 0.7 percentage points to 37.6% in 2024 to 2025.

Average rates of Income Tax vary over time depending on the number of overall Income Tax payers and the number in each marginal rate band, as well as growth in incomes and changes to Income Tax thresholds and allowances.

Related Publications

Users of the Income Tax Liabilities Statistics may also be interested in HMRC’s other publications including the Survey of Personal Incomes (SPI) statistics and Statistics on Income Tax receipts.

Contact Information

If you have any queries regarding this publication, please use the contact information below to get in touch.

Statistical contacts: M Brunning, S Delf, B Avey, J Henderson, personaltax.statistics@hmrc.gov.uk

Media contact: HMRC Press Office, news.desk@hmrc.gov.uk

Publication date: 27th June 2024

Frequency: Published annually

Next publication date: May/June 2025