Workers paying less in income tax than before recession

UK workers now pay a smaller fraction of their wages out in income tax than before the recession, new analysis has shown.

Statistics from accountants UHY Hooker Young reveal that the amount employees were paying out in income tax shot up during the recession, with workers paying £4,700 each per year in 2006/7, compared to £5,030 in 2009/10.

However, with wages now rising faster, less is being paid out in income tax. UHY Hacker Young report that the average income for UK taxpayers rose from £25,500 to £28,400 in the same period, a rise of 11.4 per cent, compared to the rise in tax paid of 7 per cent.

Rob Durrant-Walker, tax manager at UHY Hacker Young, said, “For the vast majority of taxpayers the effective tax rate fell during the financial crisis. The tax bill for someone on a static income of £20,000 will have decreased by about 11 per cent over the last three years. Of course, that doesn’t reflect the increase in VAT and other indirect taxes.”

The research also shows significant discrepancies in the proportion of income tax paid out in different areas across the country. UHY Hacker Young said this could be partly due to the way public and private sector jobs are concentrated.