Baby boomers outnumber Gen-Z taxpayers in a shocking tax shift

In the United Kingdom, a notable shift in the demographics of income tax payment has emerged following the pandemic. According to the latest data from HM Revenue and Customs, over 5.4 million individuals aged over 70 paid income tax in the financial year 2022-23. In stark contrast, there were only 5.23 million taxpayers under the age of 30, indicating a significant change from pre-pandemic trends where younger workers previously outnumbered baby boomers in terms of tax contributions. The increase in taxpayers over 70, particularly those aged over 75, has raised questions about the economic conditions affecting younger generations. The report highlights that individuals aged over 70 paid a total of £19.1 billion in income tax, while those under 30 contributed £18.3 billion, demonstrating that older taxpayers are shouldering a larger tax burden than their younger counterparts. This change appears to be fueled by several factors, including the rising tax bills for many retired baby boomers due to the triple lock system, which guarantees that state pensions increase annually in line with earnings, inflation, or a minimum 2.5 percent rate, whichever is highest. As a result, many retirees have seen their incomes grow, leading to increased tax liabilities. Simultaneously, the data reflects a growing concern regarding youth unemployment in the UK. There were more than 3.03 million economically inactive young people aged 16 to 24 in late 2024, representing an increase of 28,000 compared to the prior year. The unemployment rate for this age group reached 14.8 percent, a rise from 11.9 percent the year before, signaling an alarming trend that may contribute to their lower levels of tax payments. The economic challenges facing younger citizens are compounded by bracket creep, which has caused many to fall into higher tax bands despite their limited income growth. Notably, recent tax policies have also impacted the number of high-rate taxpayers. The HMRC recorded a significant rise in those paying the top rate of 45 percent, showing a 10 percent increase to 600,000 individuals in the most recent tax year. Meanwhile, higher-rate taxpayers increased from 680,000 to 5.1 million. In total, around 80 percent of the workforce is subject to the 20 percent basic income tax rate, which accounts for approximately one-third of total tax revenues, while the higher- and top-rate taxpayers contribute significantly more despite making up a small percentage of the workforce. There are predictions that the number of overall taxpayers will continue to rise, as evidenced by previous forecasts from the Office for Budget Responsibility.