Low-income households hit by indirect tax rises

The poorest households now pay nearly one-third of their income in indirect taxes, according to the latest official figures. The poorest fifth pay 31 per cent on taxes such as VAT and alcohol and fuel duties – much higher than the 13 per cent paid by the richest households.

The annual report from the Office for National Statistics looks at how taxes and benefits redistributed income between various household groups in 2010/11.

Key points

  • The poorest fifth of households saw a bigger proportion of their income go on indirect taxes in 2010/11 – up from 28 to 31 per cent, compared with a rise from 12 to 13 per cent for the richest fifth.
  • The richest fifth of households pay 24 per cent of their gross income in direct taxes (such as income tax), while the poorest fifth pay 10 per cent.
  • Poorer households generally get more in cash benefits (such as tax credits, housing benefit, income support and state pensions) compared with richer ones. But the largest cash benefits are, in fact, received by households in the second quintile group rather than those on the lowest incomes, largely because of retired people on state pensions.

SourceThe Effects of Taxes and Benefits on Household Income, 2010/2011, Office for National Statistics
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