2022/23 UK Income Statistics: incomes rise, but lose the rose-tinted spectacles

HMRC has published its income statistics for 2022/23 – available here and here.

Income after tax rose across the board in 2022/23, with middle-income groups seeing the largest rise with the median income rising 4% year-on-year.

Higher earners continue to shoulder a greater share of the income tax bill; additional rate taxpayers accounted for 1.7% of taxpayers but 34% of total tax paid.

Higher rate taxpayers accounted for 14.8% of taxpayers but 34.7% of total tax paid and basic rate taxpayers accounted for 81.8% of taxpayers but 30.8% of total tax paid.

Savers rate taxpayers accounted for 1.8% of taxpayers and 0.4% of total tax paid.

Nicholas Hyett, Investment Manager at Wealth Club, said, “There’s a tendency to look back on the past with rose tinted spectacles, and to be fair incomes rose more or less across the board in 2022/23. Take those spectacles off and things look far less pretty.

“An inflation rate of 7.8% (CPIH) in the year to April 2023 means every percentile faced a real terms pay cut.

“The middle income bracket was least affected by the inflationary rise, with the median income up 4.1%. However, a side effect of that is that higher rate taxpayers are shouldering an increasing share of the tax bill.

“In 2021/22 higher rate payers accounted for 32.6% of the total tax take, in 2022/23 that had risen to 34.7%. The number of people in the higher rate tax band also increased from 32.6% of taxpayers to 34.7%.

“These numbers might be a little dated – but they show a trend that is only likely to have accelerated over the last few years. Frozen tax bands are designed to slowly and stealthily push people into higher tax bands and increase the amount of tax they pay. Unfortunately, the middle income bracket will continue to see itself squeezed by the taxman for the foreseeable future.”