Average household pays £650,000 in tax

Tim Wallace
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AN AVERAGE household can now expect to pay a quarter of a million pounds in income tax over its lifetime, according to research out today from the Taxpayers’ Alliance.

Once £101,000 in VAT has been added, as well as taxes including national insurance contributions and council tax, total payments to the state amount to £656,000.

The total, made using 2009-10 data, is up from £600,000 five years earlier.

The top 20 per cent of households by income can now expect to pay an average of £1.3m, while the lowest fifth pay £235,000 each.

The report comes after a week in which Deputy Prime Minister Nick Clegg pushed for the income tax threshold to be raised after the next election to take minimum wage-earners out of the tax altogether.

The bottom 20 per cent are the hardest hit by VAT and council tax, which take £57,000 and £55,000 each.

On an annual basis, the poorest households – with an average income of £11,730 – pay £4,688, mainly made up of indirect taxes.

The richest fifth, earning an average of £79,888, pay £29,995 per year, mainly through direct taxes on income.

In retirement, the bottom fifth pay £3,175 per year and the top 20 per cent pay £9,459 annually.

“Households in the UK now pay an incredible amount in tax over a lifetime, handing over a hefty slice of their income,” said the Taxpayers’ Alliance’s Matthew Sinclair.

“The Chancellor needs to deliver a tax cut in the Budget, to ease the burden and help the economy to grow. Simpler, fairer taxes can decrease the lifetime tax bill for households and leave everyone with more of their own money.”

According to “Tax Freedom Day” calculations, taxpayers will work from 1 January to 26 July to pay for the cost of government and regulation – effectively 206 days of the year before they can start earning for themselves.