Are taxpayers paying less income tax than in 2010?

Published: 11th Apr 2018

In brief

Claim

A typical taxpayer pays £1,075 less income tax than they did in 2010.

Conclusion

Correct, a typical taxpayer pays £1,075 less in income tax now than in 2010/11 but this calculation doesn’t account for inflation. It's around £850 less in income tax once this is factored in.

“A typical taxpayer pays £1,075 less income tax than they did in 2010.”

Conservative Party, 2 April 2018

The typical taxpayer pays £1,075 less income tax than in 2010/11, but this calculation doesn’t take account of how the value of the pound has changed since 2010/11.

In 2010/11, the income tax personal allowance (the portion of income that is untaxed) was £6,475 and this year (2018/19) it increased to £11,850. That’s an increase of £5,375.

The increase means that this year taxpayers will not pay the basic 20% income tax rate on £5,375 of their income which they would have in 2010/11. That equates to £1,075 less tax.

However £6,475 in 2010/11 is worth around £7,620 in 2018/19 terms when inflation is factored in. So the increase in the personal allowance is less, around £4,230 in 2018/19 prices. 

That means typical taxpayers will pay around £850 less in income tax in 2018/9 than in 2010/11, accounting for inflation.

Most taxpayers are basic rate taxpayers as most earn under the £46,351 threshold to qualify for the higher 40% tax rate.

This doesn’t necessarily mean that those paying less due to income tax changes are taking home more money overall. The Institute for Fiscal Studies found that when including changes to other taxes and benefits such as VAT and child tax credits, changes have led to “significant reductions in household income” for low-income households between 2010 and 2015. 

Correction 11 April 2018

We clarified the conclusion to make clear that the calculation was correct, though didn't factor in inflation.


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