Behind the numbers on income tax
New income tax statistics from HMRC appear to be good news, but the numbers are not what they seem.
New income tax statistics from HMRC appear to be good news, but the numbers are not what they seem.
Taxpayer’s marginal rate |
Basic Rate |
Higher Rate |
Additional Rate |
2020/21 Average tax rate |
9.5% |
21.8% |
38.3% |
2023/24 Average tax rate |
9.9% |
20.8% |
38.0% |
Source: HMRC
This table, recently released by HMRC, shows the average income tax rate for the three main categories of taxpayer. For example, in 2020/21, on average, basic rate taxpayers paid 9.5% of their income in tax and in the current tax year are expected to pay a slightly larger share, 9.9%. At first sight, higher rate and additional rate taxpayers seem to be doing better, as their average income tax rate drops.
HMRC offers no real explanation for the difference, other than a statement that says, “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.”
The story behind the changing numbers may be why HMRC is less than comprehensive in setting out what has happened:
All of which should make you check what tax band you fall into for 2023/24 and seek professional advice if you have questions or concerns about how the changing rates might affect you.
Tax treatment varies according to individual circumstances and is subject to change.
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For specialist tax advice, please refer to an accountant or tax specialist.
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