UK has one of the highest tax burdens for both low and high earners

• Research by UHY, the international accounting and consultancy network

The UK has one of the highest tax burdens for both low and high earners of any major economy, reveals new research by UHY Hacker Young.

The UK is ranked 7th out of 19 countries according to how much tax it takes from high and low earners’ wages. The tables (below) rank countries from highest tax burden first to the lowest tax burden last.

UHY studied tax data in 19 key countries across its international network, including members of the G8 as well as key emerging economies. Each country was asked to calculate the ‘take home pay’ for low and high income workers taking into account personal taxes and social security contributions. The calculations are based on a single, unmarried taxpayer with no children.

The UK was ranked 7th out of 19 for taxes on low earners and 7th out of 19 for taxes on high earners. Low earners were defined as workers earning USD$25,000 per annum while high earners were defined as workers earning USD$200,000 per annum.

Only Mexico, Estonia, Italy, France, India and Germany take more in tax and social security than the UK from an employee earning USD$25,000. For a person earning USD$200,000 again only six countries – France, Israel, Germany, Ireland, the Netherlands and Italy – take more in tax and social security contributions than the UK.

The G8 countries
Amount of tax and social security per country in US dollars (from highest tax to lowest tax)

Allan Hickie, a Partner in UHY Hacker Young’ Sittingbourne office comments: “The Government is now facing a difficult dilemma. Achieving a more sustainable fiscal position will be difficult without raising taxes, but higher taxes are likely to hinder economic growth.”

“The 50% tax rate on people earning more than £150,000 a year, combined with increases in National Insurance, has undoubtedly made the UK less attractive to high earners. Many of these people will be highly skilled and they are usually very mobile. The UK risks losing skills and capital if high earners are taxed significantly more than competitor countries.”

“Companies look at personal tax rates when choosing where to locate. If the tax burden is too high, they may struggle to attract the necessary talent.”

For high earners the difference in the amount of tax collected between the highest taxing country – Italy – and the lowest taxing (excluding Dubai) – Russia – is USD$65,811, which means than a person earning USD$200,000 per annum in Italy would pay over three times as much tax and social security as the equivalent person in Russia.

All 19 countries surveyed by UHY
Amount of tax and social security per country in US dollars (from highest tax to lowest tax)

The UHY research reveals that for low earners – excluding Dubai – the difference in the amount of tax collected between the highest taxing country – Germany – and the lowest taxing – Ireland – is US$5,788, which means than a person earning US$25,000 per annum in Germany would pay over six times as much in tax and social security as the equivalent person in Ireland.

Allan comments: “Low earners in the UK pay more in tax than many of the Western countries we studied – with the exception of Italy, France and Germany. If the Government is serious about trying to reform the benefits system and incentivise people to take low paid jobs, it needs to look at this. It will be interesting to see how the UK ranks once the tax free personal allowance has been increased to £10,000.”

UHY Hacker Young , Thames House, Roman Square, Sittingbourne, Kent ME10 4BJ.

Tel: +44 1795 475 363.  Web: www.uhy-uk.com