Annual income tax paid by the public has doubled over the past two decades, according to data from HM Revenue & Customs.
In the 1999-2000 tax year, £93bn was paid in income tax. By 2018-19, the latest year for which figures are available, this had risen to £187bn. HMRC predicts the number will reach £199bn by 2021-22.
More people have also been drawn into the tax system over the period, the data showed. While there were 27.2m taxpayers in 1999-2000, this had risen to 31.6m people in 2018-19.
The number of taxpayers is set to rise further, encompassing 32.2m people in 2021-22, driven by growth in population and employment as well as the government’s recent freezing of income tax thresholds.
In bad news for high earners, the biggest growth is expected among additional tax rate payers, who pay income tax at 45 per cent in England, Wales and Northern Ireland and 46 per cent in Scotland.
HMRC estimated there would be 440,000 additional rate taxpayers in 2021-22, up 10.3 per cent from 2018-19. This compares with a 2.6 per cent rise in the number of basic-rate taxpayers to 27m in 2021-22 — but a fall of 2.4 per cent in higher rate taxpayers to 4.13m.
Sarah Coles, personal finance analyst at investment broker Hargreaves Lansdown, said: “We’ve had a few years of more positive news for higher earners, because the personal allowance has been rising gradually, and we’ve seen a bump in the higher-rate tax threshold too, so the proportion of people paying higher rate tax has dropped.
“Unfortunately, things are set to get far grimmer for the next few years. The freeze in the personal allowance and higher-rate tax threshold means more people will pay more tax, and the number of higher-rate taxpayers will grow again.”
The number of additional rate taxpayers jumped because the threshold has been frozen at £150,000 since it was introduced in 2010-11. “As average total incomes increase, more individuals become eligible for the additional rate,” HMRC said.
The economic impact of the Covid-19 pandemic is likely to have reduced the number of taxpayers, the tax authority added. It suggested estimates for future years were more uncertain as a result of the pandemic and could be more likely to change than previous years’ estimates.
Nevertheless, tax experts have previously warned that more people will be brought into basic and higher rates of income tax between now and April 2026, as a result of chancellor Rishi Sunak’s decision to freeze the personal allowance at his Budget in March.
Sunak confirmed that the personal allowance at which people start paying income tax will remain at £12,570 until April 2026, rather than rising with inflation as has been the case for several years.
At the time the independent Office for Budget Responsibility projected the changes would bring 1.3m individuals into the income tax net by 2025-26 and lift 1m taxpayers into the higher tax bracket.
To avoid overpaying tax, Coles suggested people make full use of their tax allowances, including pensions and individual savings accounts (Isas), which enable savers to make tax-free deposits.