Home Personal Finance The London income tax bomb hits a record £51.6 billion

The London income tax bomb hits a record £51.6 billion

The London income tax bomb hits a record £51.6 billion


Ondon’s income tax bill has risen to a record £51 billion, with 11 boroughs paying more to the Treasury than any region outside the South East, official figures revealed on Thursday.

Kensington had the largest tax bill of any constituency at nearly £3.5 billion, more than all of Northern Ireland put together.

Capital contributed a whopping £51.6bn to the government in this levy in 2020/21, up from £48.3bn in 2019/20 and £33.7bn in 2010/11, an increase of nearly £18bn in a decade.

The South East paid the second highest amount of income tax in 2020/21 at £36bn, followed by the East of England at £20.4bn, although the latter was eclipsed by the £20.8bn from 11 London Boroughs.

The Bank of England in the city


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The analysis was published ahead of the interest rate decision by the Bank of England’s monetary policy committee as millions of households grapple with their weekly budgets in the cost-of-living crisis.

With inflation remaining stubbornly high, above ten per cent according to the latest figures, an increasing number of people will be dragged into paying more income tax as wages rise through a series of ‘hidden levies’ imposed for another five years.

Ministers also had to respond to an urgent question in the House of Commons on Thursday about food price inflation that hit 18 percent in February, its 45-year high, amid shortages of some vegetables, including salad.

The figures showed the cities of London and Westminster paid £2.94bn in income tax in 2020/21, Chelsea and Fulham £2.51bn, Hampstead and Kilburn £2.44bn, Richmond Park £1.67bn, Westminster North £1.52bn, Battersea £1.43bn, Wimbledon £1.3bn. Islington South and Finsbury £1.24bn, Holborn and St Pancras £1.23bn, and Hornsey and Wood Green £1.05bn.

Esher and Walton had the largest account outside London at £1.44 billion.

The other 13 in the top 25 largest contributors were Finchley and Golders Green £1.04bn, Poplar and Limehouse £1.02bn, Putney £1.02bn, Twickenham £987m, Bermondsey and Old Southwark £975m, Tooting £959m, Hammersmith £894m, Brentford and Isleworth £883m, Ealing Central and Acton £873m, Beaconsfield £863m, Hitchin and Harpenden £847m, South West Surrey £837m and Runnymede and Weybridge £813m.

Taxes will continue to rise for millions of workers through a series of so-called “stealth taxes”, including freezing the thresholds above which people start paying the base rate of 20 pence and the higher rate of 40 pence until 2028, at £12,570 and £12,570. 50,270 retroactive.

The Institute for Fiscal Studies estimates that the freeze of surcharges and thresholds for income tax and national insurance contributions will mean an extra £500 a year for many base rate taxpayers as inflation and wages rise, and about £1,000 for much higher tax rates . payers.

Sir Ed Davey, leader of the Liberal Democrats who compiled the income tax figures, said: “This secret tax raid will put even more strain on people’s finances at a time when mortgages and rents are already skyrocketing.

“Every month, families look at their paychecks and feel deprived as even more of their wages are swallowed up by endless tax hikes.”

The Treasury defended the tax increases that are part of the government’s plans to restore stability to public finances, but which will push the country’s tax burden to its highest since World War II.

A spokesperson said: “After borrowing hundreds of billions to support the economy during the pandemic and since Putin’s invasion of Ukraine, it is vital that we stick to our plan to halve inflation this year and reduce debt. reduce to promote long-term growth.

“We have a fair and progressive tax system. The more you earn, the more you pay.

“That’s why more than half of all income taxes are paid by the five percent of the largest payers, and we’ve doubled the tax-free personal deduction since 2010, which means three million of the lowest earners have no total income tax to pay.”

Research from the Commons Library has shown that there will be 450,000 more higher-rate taxpayers in London in 2027/2028 as a result of the income tax threshold freeze, and 500,000 in the South East, by far the largest increases.

There will also be an additional 300,000 basic fare payers in the capital and 400,000 in the southeast.

The region with the fourth largest income tax assessment in 2020/21 was the North West with £15.2 billion, followed by the South West with £13.4 billion, Scotland with £12.9 billion, West Midlands with £11.6 billion, Yorkshire and the Humber at £10.3bn, East Midlands £10.1bn, Wales £5.37bn, the North East £4.53bn and Northern Ireland £3.07bn.

Kensington’s income tax contribution increased from £2.94 billion in 2019/20 to £3.49 billion, with increases in both average employment and the average flow of self-employment.

Income tax is levied on most sources of income, including salaried earnings, self-employment earnings, personal and corporate pensions, annuities, retirement pensions, foreign income, property income, taxable social security income, savings income, stock (dividend) income, and trust income .

Employees who receive non-monetary benefits from their employer, such as company cars, fuel, health insurance, housing, or loans, also pay income tax on these benefits.

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