Stealth tax squeeze: Typical earnings fell by over £1,450 last year

11 Apr 2023

EMBARGO: For Immediate Release

Average UK worker sees earnings fall by £1,455 once inflation and taxes taken into account

Those in the ‘Blue Wall’ around London and South East are worst affected

Stealth taxes will drag 3.5 million more UK workers into higher tax band in 2023/34

A typical take home salary fell by over £1,450 once adjusted for inflation and tax rises, new House of Commons Library research commissioned by the Liberal Democrats has revealed.

The party warned that British workers are being “clobbered” with a stealth tax raid at a time when millions are already seeing their wages squeezed.

The figures show average earnings for a full-time worker went from £27,493 in 2021 to £26,038 last year, after income tax and National Insurance were deducted and pay was adjusted for rising inflation.

The annual drop in earnings was biggest in London, where average earnings fell by £1,775 to £31,761. The picture was equally bleak across the so-called ‘Blue Wall’, in the South East of England, where people saw a £1,614 hit to their annual net salary over the same period.

The fall in real-terms take-home pay came despite the average pre-tax income in the UK rising to £33,280, with pay rises more than wiped out by rising taxes and soaring inflation. It means that earnings after tax have fallen to roughly 2013 levels, once adjusted for inflation.

The figures come at a time when an estimated 3.5 million people in the UK are expected to be pushed into a higher income tax band in 2023-24, due to the freezing of income tax thresholds by the Chancellor. The freezing of tax thresholds will also lead to an increase of £12bn in income tax paid by taxpayers in the UK this year alone.

Commenting, Liberal Democrat Treasury Spokesperson Sarah Olney MP said:

“British workers are seeing their wages squeezed with a stealth tax raid at a time when millions are already feeling the pinch.

“Families are already facing rampant inflation, soaring bills and huge increases to their rent or mortgage. Now, they are looking at their paypacket being eaten further, this time as a result of endless tax hikes.

“The hard working middle across the country is already facing the highest tax burden in 70 years, and many think that enough is enough. It’s no wonder so many voters across the Blue Wall simply feel the Conservative Party no longer speaks for them.”

ENDS

Notes to Editors

First reported by The Times here.

Research from the House of Commons Library on average earnings for the UK, London and the South East can be found here, for all UK regions here, and on expected fiscal drag on income tax here.

According to the Office for Budget Responsibility, 2.2 million workers will be dragged into basic rate tax, and 1.3 million into higher rate tax in 2023-24, as a result of frozen tax thresholds [March EFO, p. 67]. The OBR also estimates that frozen income tax thresholds will cost taxpayers £12bn in 2023-24 [March EFO, p. 66].