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While the cost of living continues to rise, the amount of tax we pay certainly isn’t going in the opposite
direction.
For some of us, the tax we pay is simply a footnote on our payslips, but virtually everything we buy or
spend money on is rooted in tax. In other words, we may be paying a lot more tax than first meets the
eye.
With the latest freeze to income tax allowances and thresholds, the government is set to pocket an
additional £40 billion by 2028, meaning higher rate taxpayers will be paying £3,700 more per year in tax.
With payable tax being a minefield for many, it’s near impossible for the average person to know how
much they’re actually paying.
In completing The Year In Tax Report, our team have crunched the numbers on how much tax we’re set
to pay over the course of a year, from National Insurance to the VAT on the milk in the fridge!
What tax will we need to pay?
To establish how much tax we pay on our salaries over the course of a year, our team took the average
annual salaries from the top 30 most populated cities and towns in England, to calculate the amount of
income and national insurance tax paid by the average person. Salary data was collected from ONS
figures.
We also analysed household cost data, including the cost of keeping a car. Combining data from
NimbleFins data on the VAT paid on the cost of running a car for a year, with the fuel duty paid on fuel
consumption and road tax, we were able to calculate the total tax payable to run a car for a year.
VAT on the cost of food per household was also calculated using NimbleFins data on the cost of food by
taking how much VAT was paid on the average cost of food per person in an average household.
With VAT on domestic energy bills taxed at 5%, we used the MoneySavingExpert Energy Price Cap
Calculator to calculate the amount of tax paid on the average energy bill of a three-bedroom house, with
2-3 people living in it (as set out by OFGEM). For other utilities such as a mobile phone plan and
broadband, we used Numbeo cost of living data for each area and calculated the VAT paid on annual
costs (20%). Tax payable on water charges couldn’t be calculated due to VAT only being paid on
wastewater usage and not clean water.
The average council tax payable in each city/town was also calculated by taking the total amount of
council tax paid across all tax bands within each city/town, and dividing this by the total number of houses across all bands gives us the average council tax bill of each city/town. This figure was then divided by two to reflect the number of adults in the average UK household. Council Tax data was taken from ONS figures.
Workers in London were found to be the hardest hit with their annual tax bill as the average person can
be expected to pay over £11,800 per year in tax, amounting to almost 27% of the average salary. Despite
the higher cost of living, London was found to have the lowest average council tax bill of just £603.11
payable per adult in the average household.
Milton Keynes and Reading also featured high on the list, with the latter home to the most expensive
average council tax bill in England of £1,052.07 payable per person.
One of the Northern cities that featured in the top 10 was Leeds, with workers expected to pay over
£8,800 worth of tax over the course of a year, being the only city in Yorkshire to feature anywhere in the
10.
Year In Tax Report
| City / Town | Income Tax & NI | Average Council Tax Paid | VAT (Energy) | Total Tax (Car) | VAT (Food) | VAT (Mobile Phone) | VAT (WiFi) | Total |
| London | £10,118.40 | £603.11 | £95.00 | £561.00 | £464.60 | £38.11 | £39.36 | £11,872.08 |
| Milton Keynes | £7,752.32 | £947.84 | £96.50 | £561.00 | £464.60 | £27.00 | £35.40 | £9,836.41 |
| Reading | £7,503.68 | £1,052.07 | £96.50 | £561.00 | £464.60 | £27.43 | £33.10 | £9,690.13 |
| Southend-on-Sea | £7,309.44 | £882.99 | £94.50 | £561.00 | £464.60 | £28.80 | £32.10 | £9,326.18 |
| Northampton | £7,017.60 | £900.66 | £94.00 | £561.00 | £464.60 | £30.60 | £35.60 | £9,057.07 |
| Swindon | £6,909.12 | £948.63 | £98.00 | £561.00 | £464.60 | £27.84 | £40.00 | £9,000.18 |
| Leeds | £6,862.40 | £830.36 | £95.00 | £561.00 | £464.60 | £29.71 | £36.70 | £8,832.26 |
| Brighton and Hove | £6,429.12 | £1,002.19 | £96.50 | £561.00 | £464.60 | £27.41 | £36.85 | £8,569.42 |
| Newcastle upon Tyne | £6,549.44 | £859.77 | £95.50 | £561.00 | £464.60 | £27.43 | £37.20 | £8,547.19 |
| Bristol | £6,293.76 | £987.68 | £98.00 | £561.00 | £464.60 | £31.68 | £41.10 | £8,428.82 |
| Wolverhampton | £6,422.72 | £857.09 | £95.00 | £561.00 | £464.60 | £28.80 | £46.08 | £8,427.79 |
| Bournemouth | £6,173.44 | £927.26 | £98.00 | £561.00 | £464.60 | £27.60 | £42.17 | £8,245.07 |
| Coventry | £6,133.12 | £876.72 | £95.00 | £561.00 | £464.60 | £27.00 | £39.60 | £8,149.54 |
| Southampton | £6,177.92 | £832.99 | £96.50 | £561.00 | £464.60 | £27.12 | £37.66 | £8,149.54 |
| Leicester | £6,164.16 | £828.16 | £94.00 | £561.00 | £464.60 | £27.60 | £39.36 | £8,131.88 |
| Portsmouth | £5,670.08 | £815.26 | £96.50 | £561.00 | £464.60 | £27.00 | £35.10 | £7,621.29 |
| Norwich | £5,554.24 | £864.10 | £96.50 | £561.00 | £464.60 | £27.41 | £42.14 | £7,561.74 |
| Bolton | £5,576.00 | £821.71 | £95.50 | £561.00 | £464.60 | £28.80 | £38.00 | £7,537.86 |
| Sheffield | £5,552.00 | £844.55 | £95.00 | £561.00 | £464.60 | £32.11 | £34.43 | £7,536.19 |
| Birmingham | £5,561.28 | £791.70 | £95.00 | £561.00 | £464.60 | £39.19 | £34.37 | £7,499.64 |
| Bradford | £5,517.44 | £813.31 | £95.00 | £561.00 | £464.60 | £28.20 | £40.50 | £7,472.55 |
| Derby | £5,403.52 | £803.07 | £94.00 | £561.00 | £464.60 | £27.00 | £35.60 | £7,341.79 |
| Liverpool | £5,308.48 | £878.44 | £95.50 | £561.00 | £464.60 | £31.20 | £37.30 | £7,328.77 |
| Peterborough | £5,376.00 | £808.10 | £94.50 | £561.00 | £464.60 | £28.80 | £33.90 | £7,319.65 |
| Luton | £4,947.84 | £876.42 | £94.50 | £561.00 | £464.60 | £35.40 | £42.00 | £6,974.51 |
| Manchester | £5,020.16 | £763.67 | £95.50 | £561.00 | £464.60 | £43.39 | £34.52 | £6,935.10 |
| Stoke-on-Trent | £4,383.04 | £705.42 | £95.00 | £561.00 | £464.60 | £28.80 | £42.74 | £6,233.10 |
| Plymouth | £4,187.52 | £852.98 | £98.00 | £561.00 | £464.60 | £27.00 | £40.80 | £6,182.90 |
| Nottingham | £3,777.92 | £905.92 | £94.00 | £561.00 | £464.60 | £27.00 | £33.30 | £5,816.74 |
| Hull | £3,744.32 | £723.33 | £95.00 | £561.00 | £464.60 | £54.00 | £50.40 | £5,645.15 |
Hull was found to be the area where workers will pay the least tax, partially due to the low average
income. Nottingham was also one of the areas where workers were expected to pay the lowest
proposition of their wages in tax.
Northern cities also ranked low in the report with both Manchester and Liverpool finishing in the bottom 10 of cities where the average person will pay the least tax.
Which areas do workers pay more of their salary in tax?
| City / Town | Annual Average Salary (£) | Total Tax Paid | % of salary |
| Reading | £36,019 | £9,690.13 | 26.90% |
| London | £44,190 | £11,872.08 | 26.87% |
| Milton Keynes | £36,796 | £9,836.41 | 26.73% |
| Swindon | £34,161 | £9,000.18 | 26.35% |
| Southend-on-Sea | £35,412 | £9,326.18 | 26.34% |
| Northampton | £34,500 | £9,057.07 | 26.25% |
| Brighton and Hove | £32,661 | £8,569.42 | 26.24% |
| Bristol | £32,238 | £8,428.82 | 26.15% |
| Leeds | £34,015 | £8,832.26 | 25.97% |
| Bournemouth | £31,862 | £8,245.07 | 25.88% |
Commenting on the research, Principal Financial Advisor at Almond Financial Sam Robinson said:
“Most of us wouldn’t think twice about how much tax is in every product or service we pay for but this data is an interesting insight into how hard tax can hit our pockets.
“Unfortunately, this will merely be the tip of the iceberg and it is evident that our salaries are becoming
increasingly stretched.
“As we continue to battle a cost of living crisis, these figures will provide uncomfortable reading for many.
For those approaching state pension age, this will provide a stark reminder that in order to live a comfortable life in retirement, it’s important to plan for retirement effectively and start putting plans into
place sooner rather than later.
It’s important that if you need advice on either planning for retirement or ongoing financial advice, seek out a financial advisor who can walk you through the next steps.”
Will I be taxed on my pension?
Previously, anyone who exceeded their pension lifetime allowance would be liable to big tax charges.
This lifetime allowance cap was most recently set at £1,073,100, however, the government reviews this
limit every year and adjusts it accordingly to reflect inflation. Now it has been confirmed that no one will
pay a lifetime allowance tax charge from 6 April 2023. If a tax charge arose before this date it is still
payable.
The lifetime allowance is set to be abolished completely from 6 April 2024.
Need pension advice but need help figuring out where to start?
Our team of financial and pension advisors can help guide you through the process of investing in life
after work. Book a call using the link below.
Methodology
To establish how much tax a person will pay over the course of a year, Almond Financial took the
average annual salaries from the top 30 most populated cities and towns in England, to calculate the
amount of income and national insurance tax paid by the average person. Salary data was collected from
ONS figures.
Almond Financial also analysed household cost data, including the cost of keeping a car. Combining data
from NimbleFins data on the VAT paid on the cost of running a car for a year, with the fuel duty paid on
fuel consumption and road tax, we were able to calculate the total tax payable to run a car for a year.
VAT on the cost of food per household was also calculated using NimbleFins data on the cost of food by
taking how much VAT was paid on the average cost of food per person in an average household.
With VAT on domestic energy bills taxed at 5%, we used the MoneySavingExpert Energy Price Cap
Calculator to calculate the amount of tax paid on the average energy bill of a three-bedroom house, with
2-3 people living in it (as set out by OFGEM). For other utilities such as a mobile phone plan and
broadband, we used Numbeo cost of living data for each area and calculated the VAT paid on annual
costs (20%). Tax payable on water charges couldn’t be calculated due to VAT only being paid on
wastewater usage and not clean water.
The average council tax payable in each city/town was also calculated by taking the total amount of
council tax paid across all tax bands within each city/town and divided this by the total number of houses
across all bands, to give us the average council tax bill of each city/town. Council Tax data was taken
from ONS figures.
All data was based on the tax to be paid by a person living in an average household of 2.3 people.
