[ad_1]
SHOCKING new statistics reveal that more than half of the working population don’t earn enough cash to pay income tax.
There were 54million adults in the UK in 2014/15, but just 31million of those paid income tax, according to analysis by think tank the Institute for Fiscal Studies (IFS).
1
That means around 43 per cent of the population earn less than £12,500 a year – the rate at which you start paying income tax.
Taking all income tax payers in the UK, the IFS says average earnings are just £22,000 a year.
But at the other end of the scale, the top 1 per cent of income tax payers are a group of around 310,000 people, who have a taxable income of at least £160,000.
They mostly live in London and the South East (see the map above) and pay around 27 per cent of the nation’s income tax.
What are the income tax rules?
In England, Northern Ireland and Wales, most people get a tax-free personal allowance of £12,500 in the current 2019/20 financial year.
So if you earn less than this you won’t pay any income tax.
- If you earn between £12,500 and £150,000 then the first £12,500 you earn is tax-free.
- After this, you pay 20 per cent on earnings between £12,501 and £50,000 – known as basic tax rate.
- If you earn more than £50,000, you’ll pay 40 per cent on earnings between £50,001 and £150,000, known as higher rate of tax.
- And anything you earn over £150,000 is taxed at 45 per cent – known as additional rate of tax.
The rules are different in Scotland. See Gov.uk for these rates.
The IFS points out that one the key reasons for this stark contrast is because the tax-free allowance – the amount of cash we earn before tax is paid – has been creeping up each year.
It currently stands at £12,500, but it was as low as £6,475 in the 2010/11 financial year and it’s expected to rise in stages to £13,310 by the 2023/24 financial year.
Another reason for the decrease in taxpayers is the rising number of pensioners who retire and see their income dip below the tax-free allowance.
John O’Connell, chief executive of campaign group the TaxPayers’ Alliance said: “The decline in the number of adults who pay income tax is in large part because of more retirees, and the increase in the personal allowance.”
But he points out that even though you might not pay income tax, there are a whole host of other things you will be taxed on.
“Too often we are forced to pay for other taxes which we might not even be aware of,” said Mr O’Connell.
“From flights to petrol, insurance to fizzy drinks, the government takes a huge proportion of our income, even if your labour isn’t taxed any more.
“National insurance and income tax should eventually be merged. This will simplify the system and ensure people are more aware of just how much HMRC extracts from them.”
National insurance of 12 per cent is currently paid on top of income tax if you earn between £8,632 a year and £50,024 a year.
Earn under £8,632, and national insurance isn’t due, but earn more than £50,024 and earnings over this will attract a 2 per cent tax.
For more information, check out our round-up of 2019/20 income tax rates 2019 and how much you’ll pay if Boris Johnson increases the threshold.
And check if you are on the right tax code for 2019/20 – you could be owed hundreds of pounds.
We pay for your stories! Do you have a story for The Sun Online Money team? Email us at money@the-sun.co.uk
[ad_2]
READ SOURCE
