12 March 2025
If you are covering the latest HMRC personal incomes statistics, please see the following comment from Shaun Moore, tax and financial planning expert at Quilter:
“The impact of the government’s fiscal drag policy has been laid bare in this morning’s personal income statistics from HMRC. In 2022 to 2023, there were a total of 34.5 million taxpayers, 19.1 million of which were male and 15.4 million were female. This represents an increase of 1.5 million taxpayers compared to the prior tax year as wages climbed while income tax thresholds remained stagnant.
"Those in employment saw the greatest increase in income during the period, rising by 8.6% compared to the tax year ending 2022 as wages rose to keep up with inflation and the cost of living crisis which was weighing heavily on households at the time. Pension income also rose significantly, by 6.8%, while self-employment income rose by just 0.2%.
“The data indicates that higher and additional rate taxpayers, totalling 5.7 million individuals, contributed 68.7% of the UK's income tax revenue during the period. In contrast, 28.2 million basic rate taxpayers and 0.6 million savers rate taxpayers account for the remaining share. This highlights the significant role higher earners play in overall tax receipts. With income tax thresholds frozen until 2028, this figure is expected to rise as more people's salaries exceed the higher rate thresholds.
Pensioners dragged into paying income tax
“The latest personal income statistics from HMRC reveal there were 7.13 million taxpayers of pension age for the tax year 2022 to 2023, an increase of 5.7% compared to the previous tax year. Given this is a lagging indicator, the real figure is likely now much higher as the state pension has increased while the personal allowance has been frozen.
“In the 2022 to 2023 tax year, the full rate of the new state pension was £185.15 per week, or £9,627.80 per year, which utilised just over three quarters of the £12,570 personal allowance. Comparatively, in the 2025 to 2026 tax year, the full new state pension has risen to £230.25 per week or £11,973 per year. This uses 95% of the personal allowance, leaving just £597 of available income before someone starts paying income tax. This increase in the state pension will no doubt have resulted in a considerable proportion of pensioners being dragged into paying tax.
“With the triple lock still in place, if the state pension continues to rise by at least 2.5%, by the 2027 to 2028 tax year the state pension will surpass the £12,570 personal allowance and will see all pensioners in receipt of the full new state pension forced to hand some of it back.
“Pensioners are often among the worst hit by frozen tax allowances because they typically will be getting their income from a number of different investments and therefore lean heavily on CGT and dividend allowances to help create a retirement income in addition to their pension.
“However, the government has made it very difficult to avert being taxed very heavily on these types of investments. It is vital that that people look across the spectrum of financial products that provide tax efficiency and use them in the right way and at the right time to try to prevent their income being eroded by tax. Seeking professional financial advice can help someone make the most of their finances as current fiscal policy now mandates a different approach to financial planning.
Gender pay gap
“Elsewhere, the figures reveal a stark disparity between the median income for men and women. Across all age groups, the median income was £31,100 for males and £25,500 for females – a huge difference of almost 20%. In addition, there were more male than female taxpayers in every age range and males had higher median income throughout.
“21,000 men earn over £1 million and 40,000 earn over £500,000, compared to just 4,000 and 9,000 women respectively. While these numbers are stark, it is even more concerning that close to 1 million more men earn over £50,000 compared to women.
“Across all the data released this morning, the only area in which women continue to outpace men is in the number earning the lowest levels of income. Women are considerably more likely than men to be earning £12,700-£15,000 in total income, while men take the lead in every other higher income band.
“These latest figures reiterate the dire need for government action in boosting women’s finance. At present, there is a significant gender pay gap during working life, and women will only suffer further when it comes to retirement as they simply will not have had the opportunity to build a good enough pension pot. What’s more, they also risk missing out on State Pension funds if they have not achieved the full 35 years’ of National Insurance contributions following the introduction of the new child benefit rules in 2013.
“Women still shoulder a far greater amount of caring work than men, and this partly feeds into why there is still such a significant gender pay and pension gap. Women often opt not to re-enter the workforce while their children are young as the cost of childcare is just too great, and this morning’s data reiterate this.
“This morning’s figures show there is still a long road ahead in terms of truly improving gender equality, much of which lies in the hands of government. The legacy of this inequality will be felt through generations, with the gender pension gap and more, and the knock-on effect of the inequalities experienced by women in their working lives will be incredibly stark without substantial intervention.”
