The tax burden in the UK is shifting on to the younger generations, according to new research published by the accountancy firm, Moore Stephens.
Baby boomers paid £63 billion in income tax in the 2015/16 tax year, compared to a bill of £41.4 billion for millennials. However, baby boomers only paid 38.2% of the total income tax paid in 2015/16, compared to 44.6% of the total in 2011/12. Millennials, however, paid 25.1% of the total in 2015/16, compared to 19.2% in 2011/12.
The research shows that ‘millennials’ (here anyone born between 1977 and 1996) have been taking the brunt of changes to stamp duty land tax (SDLT), changes to national insurance contributions (NICs) for high earners and the pension rules, whilst baby boomers (anyone born between 1946 and 1965) move property less and are increasingly benefiting from changes to pensions rules.
Millennials are more likely to be buying property and earning higher salaries, whilst baby boomers are more likely to be using pension freedoms to draw income instead of buying annuities – with low interest rates making these products less attractive – which helps reduce their income tax bill.
Insolvencies also rising
In October, Ralph Moore also reported a stark increase in new insolvencies for the under-25s – 5,650 in 2017, a 20% increase from 2016. The figure reduced for those over 65 - 4,580 in 2017, down 10% from 2016.
The firm suggested that millennials are being squeezed by property price inflation, and being forced to commit to larger mortgages, which leaves them with fewer savings to deal with financial stress. Conversely, the baby boomers typically have lower housing costs, and can draw on the equity value of their property if needed.
The reports both suggest the trends will continue, putting greater financial pressure on the younger generations.