Recent data from HMRC reveals that more retired baby boomers are paying income tax compared to Gen Z workers, marking a significant shift from the pre-COVID period.
In the 2022-23 financial year, 5.45 million Britons aged over 70 paid income tax, surpassing the 5.23 million aged under 30. Notably, over-70s contributed £19.1bn in income tax, exceeding the £18.3bn paid by under-30s, showcasing Britain’s increasing reliance on retirees.
The rise in tax bills for baby boomers can be attributed to many being brought into the income tax net due to the triple lock policy. This policy ensures that the state pension increases in line with average earnings, inflation, or 2.5% – whichever is highest.
Furthermore, income tax thresholds have remained frozen since 2021, rather than adjusting for inflation. This freeze is set to continue until 2028, indicating that income tax payments across all age groups are expected to escalate.
The chancellor, Rachel Reeves, is heavily reliant on tax from pensioners. Pic: PA
In addition, HMRC’s data dump revealed that the number of higher rate taxpayers (40p) surged by 680,000 to reach 5.1 million individuals in 2022-23, a direct result of static thresholds. The count of top rate (45p) taxpayers also saw a 10% increase to 600,000.
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An analysis of the figures indicates that while roughly 80% of the workforce pay the basic rate of income tax, they contribute only around 33% (£75.6bn) of total tax revenues. On the other hand, the five million taxpayers in the higher rate category contribute another third of tax revenues (£85.1bn).
Despite representing just 2% of the workforce, those paying the 45p rate contribute a further third (£83.4bn) to the tax revenues.
A comparison with pre-COVID data from 2019-20 shows a significant increase in income tax revenues, with more under-30s paying income tax than retirees during that period.
This comparison highlights the substantial growth in income tax revenues over time and the shifting dynamics in tax contributions between different age groups.