The UK’s wealthiest households are shouldering a disproportionate share of the national tax burden, according to recent analysis by the think tank Civitas. Data reveals the top 20% of earners contribute over half of all income tax revenue, highlighting a growing disparity in the country’s tax system. Simultaneously, middle-income households are becoming increasingly dependent on government benefits, raising concerns about the long-term sustainability of the UK economy.
Civitas’ study of official figures shows the richest quintile pays 55% of all direct taxes collected by the Treasury, which includes income tax, National Insurance, and council tax. This group also contributes a significant 47% of all taxes, encompassing both direct and indirect levies like VAT. In stark contrast, the poorest 20% of households pay a considerably smaller proportion. The average annual tax bill for the wealthiest quintile is £52,400, six times higher than the £8,800 paid by the lowest quintile. Furthermore, the top 10% alone are responsible for 40.5% of national direct taxes and a third of the overall tax revenue.
While high earners bear the brunt of taxation, a concerning trend is emerging among middle-income households. Official data indicates over half (52.6%) of UK households receive more in cash benefits than they pay in taxes, the third-highest rate on record and significantly above pre-pandemic levels. This represents a substantial increase from the pre-financial crisis era, when around 40% of the population were net recipients of state benefits. The number has steadily climbed since the 2008 crash and accelerated during the pandemic. Since 2019-20, the number of individuals who are net beneficiaries of the tax and welfare system has surged by almost 4 million, reaching 35 million, compared to 24 million in 1999-00.
Civitas researchers Daniel Lilley and Ellen Pasternak attribute this rise to the increasing reliance of middle-class households on the benefits system. Wage stagnation since the financial crisis has limited the tax contributions of this group. Real wages, which grew by a third every decade between 1977 and 2007, have seen no overall growth in the 17 years since. Consequently, the middle quintile’s tax contributions have diminished. In 2005-06, this group paid 1.3 times more in direct taxes than they received in benefits. By 2022-23, this ratio plummeted to 0.9, indicating middle earners, with an average household salaried income of £47,000, are now net recipients of state support.
This shift raises significant concerns about the UK’s economic future. Lilley and Pasternak warn that an economy where over half of households cannot support themselves is unsustainable. This trend underscores the need for policies that address wage stagnation and promote economic self-sufficiency. The increasing reliance on benefits coupled with the heavy tax burden on high earners paints a complex picture of the UK’s fiscal landscape, demanding careful consideration and potential reform.
