UK taxes at historical high

UK taxes at historical high

UK taxes are at a historical high, accounting for over a third of GDP at 34.4% and up almost seven percentage points from the 1950s, according to a new Institute for Fiscal Studies (IFS) report.

In the 1950s, taxes accounted for just under a third of GDP at 27.5%, which was £5.8 billion. Since then, tax revenue rose to £627.9 billion in 2018/19. This is forecast to rise further in 2019/20 to £757 billion. Equivalent to a per capita GDP contribution of £14,000 per adult.

According to the IFS, the top 1% of the adult population now pays well over a third of all income tax. Whilst only 58% of UK adults are liable for income tax.

The IFS said that policy reforms since 2010 have increased tax revenue by around £20 billion overall. Despite large giveaways increasing the income tax personal allowance, cutting the headline rate of corporation tax and freezing fuel duties. Tax-raising measures, including rises in VAT and national insurance contribution (NIC) rates, exceed these giveaways overall in revenue terms, the IFS added.

Senior Research Economist at the IFS, Stuart Adam has commented on the report. Stating: ‘Taxes in the UK are not high by international standards. But they are high by historical standards: almost 35% of national income, the highest sustained share since the 1940s.

‘And our tax revenues are ever more reliant on a small group of high-income taxpayers. It is average earnings, rather than top earnings, that would be taxed markedly more if the UK adopted the tax system of a typical higher-tax country.’

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