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Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.

And discover why the average proportion of income to be paid in tax is falling

It might not feel like it, but the average rate of tax paid in the UK is actually falling.

According to the latest Government data, the Treasury is set to inhale a mind-boggling £185bn from income tax receipts in 2018/19, up marginally from the £178bn it collected in 2015/16.

But the average proportion of income each of us hands over to the taxman is expected to hit 16.7% in the current tax year – lower than the figure recorded three years ago (2015/16: 17.2%).

This trend has been driven by a couple of policy initiatives.

Firstly, rapid rises in the personal tax-free allowance since 2010 mean in 2018/19 no tax will be due on the first £11,850 you earn this tax year –  although this tapers away for those with taxable incomes above £100,000.

Secondly, the basic rate 20% band has widened in recent years, lowering the amount of income taxed at the higher 40% rate.

Even the country’s highest earners – those with gross incomes of £150,000 or more – have only seen moderate rises in their tax rates in recent times.

However, the imposition of the annual allowance ‘taper’ in 2016/17 will likely see the tax burden on those in the 45% additional-rate tax bracket increase – particularly as the ability to ‘carry forward’ the pre-taper £40,000 allowance shortly disappears.



Under carry forward, pension savers can utilise unused annual allowance from up to three previous tax years in the current tax year. This means someone entitled to a £40,000 annual allowance who hasn’t paid into a pension in the last three years could pay £160,000 into a pension this year without   paying any tax.

However, those hit by the taper will only be able to carry forward with reference to their tapered annual allowance. This could be as low as £10,000 for those with total income of £210,000 or more.

The current tax year (2018/19) therefore represents the last opportunity for those affected by the taper to carry forward up to £40,000 of annual allowance from 2015/16 (the year before the taper kicked in).

For more on how the annual allowance taper could affect you, read here:


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