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

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.

Breakdown of after-tax income by percentile

	2021 to 2022	2022 to 2023	Year-on-Year Change
1st percentile	£                  12,700	£                  12,800	0.8%
5th percentile	£                  13,700	£                  13,800	0.7%
10th percentile	£                  14,800	£                  15,000	1.4%
25th percentile	£                  18,200	£                  18,700	2.7%
50th percentile	£                  24,500	£                  25,500	4.1%
75th percentile	£                  36,100	£                  37,400	3.6%
90th percentile	£                  51,100	£                  52,700	3.1%
95th percentile	£                  66,900	£                  68,700	2.7%
99th percentile	£                130,000	£                132,000	1.5%

 

Breakdown of taxpayers and tax take by tax rate – 2022/23

	Proportion of taxpayers	Proportion of tax paid
Savers	1.8%	0.4%
Basic	81.7%	30.9%
Higher	14.8%	34.7%
Additional	1.7%	34.0%

 

Breakdown of taxpayers and tax take by tax rate – 2021/22

	Proportion of taxpayers	Proportion of tax paid
Savers	1.8%	0.4%
Basic	83.2%	31.3%
Higher	13.4%	32.6%
Additional	1.6%	35.8%