HMRC's income statistics for 2022/23 reveal a general increase in income after tax, particularly for middle-income earners whose median income rose by 4%. However, inflation of 7.8% resulted in real-term pay cuts across all income brackets. Higher earners are now carrying a larger portion of the tax burden; additional and higher rate taxpayers accounted for significant portions of total tax paid. Tax band freezes have contributed to more individuals falling into higher tax categories, further straining the middle-income bracket in future trends.
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.
Frozen tax bands are designed to slowly and stealthily push people into higher tax bands and increase the amount of tax they pay.
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