We know that paying taxes is an emotive subject. Deciding who pays more, who benefits, and the overall tax burden is no easy task.
From our conversations with clients, many don’t object to paying taxes—provided the money is well spent. The key concern is whether tax revenue is being invested wisely or squandered.
What many may not realize is that HMRC publishes an annual tax summary for all self-assessment taxpayers. By logging into your HMRC account, you can see exactly how much you contribute and where it goes.
Here are some interesting statistics:
Who Pays vs. Who Benefits: The proportion of households receiving more in benefits than they pay in taxes fell slightly but remained over 52% in the 2022/23 tax year. However, this includes state pensions, which many argue are not ‘benefits’ but deferred earnings. For every £100 paid in taxes, £21.60 went toward welfare, and £11.40 toward pensions—meaning almost a third of all income tax funds these two areas.
Income Shifts: The income of the poorest fifth of UK households rose by 9.1%, while the richest fifth saw a decline of 10.6%. While few will shed tears for the highest earners, they play a vital role in driving economic growth. If they earn less, they pay less tax, which ultimately affects everyone.
The Rise of ‘Accidental’ Higher-Rate Taxpayers: Around 36 million people pay income tax in the UK, with 6 million in the higher rate bracket. The number of higher-rate taxpayers has risen by 40% over three years, largely due to the freezing of personal allowances, pulling many into higher taxation without any real increase in their inflation-adjusted earnings. Many of these individuals would not consider themselves high earners.
Tax Distribution: The top 50% of taxpayers earn just under 75% of total income but contribute over 90% of all income tax. The top 1%—those earning the most—receive around 12.5% of total income yet pay nearly 30% of all income tax. While it’s reasonable that the wealthiest contribute more, there is a tipping point. In 2024, 10,800 millionaires left the UK, including 78 individuals worth over £100 million and 12 billionaires. The most mobile earners are also those most capable of structuring their affairs to minimize tax. When they leave, the UK loses not just their income tax but also their VAT contributions, payroll taxes from their employees, and investments in property and business.
Government Spending: Beyond welfare and pensions, the largest tax-funded expenditures include the NHS (£20 of every £100 paid) and national debt interest (£11 of every £100). Given rising government borrowing, debt interest is set to increase further.
Many taxpayers question whether they’re getting value for money. For example, do you feel safer for the 5.2% spent on defence or the 4.4% allocated to public safety (policing, etc.)? Is the rail and road network in good shape given the 4.2% spent on transport? Are schools delivering high-quality education and a safe learning environment for the 10.2% spent on education?
What Does This Mean for You?
The trend suggests that taxes will continue to rise rather than fall. With little political appetite to cut the cost of government, increased revenue must come from higher taxation.
Economic growth is the best way to increase tax revenue without simply raising tax rates. A thriving economy generates more income, which leads to higher tax receipts. However, if growth remains sluggish, the tax burden on individuals and businesses will only increase.
What Can You Do?
Now, more than ever, it’s crucial to ensure you are not overpaying on taxes. Are you making full use of allowances, reliefs, and legitimate tax-saving opportunities? Seeking professional advice could help reduce unnecessary tax bills.
Beyond tax efficiency, personal and business growth is key. If the government isn’t achieving the economic expansion it needs, it’s up to individuals and businesses to drive their own growth. Ensuring your business is lean, efficient, and positioned for success is vital.
If you want to take control of your financial future, download a copy of our Business Growth Plan document to help you plan ahead. Contact us for help and to get a tailor-made plan to take your business forward.
Disclaimer: This is intended for informational purposes only and does not constitute financial advice. Please talk to us before making any financial decisions.