HMRC’s 2022/23 income data shows post-tax earnings rose across all percentiles, with the median income increasing by 4.1%. However, high inflation meant most individuals experienced a real-terms pay cut. Higher and additional rates taxpayers continued to shoulder a growing share of the income tax burden.
The latest income statistics published by HM Revenue and Customs (HMRC) for the financial year 2022/23 reveal an overall rise in post-tax income across the UK. However, this apparent improvement is overshadowed by high inflation, which reduces the value of those gains in real terms.
The data indicates that while all income percentiles saw some increase in after-tax earnings, the median income—representing the middle-income group—rose by 4.1%, from £24,500 in 2021/22 to £25,500 in 2022/23. This group experienced the largest year-on-year gain compared to other percentiles.
Nicholas Hyett, Investment Manager at Wealth Club, remarks: “There’s a tendency to look back on the past with rose-tinted spectacles, and to be fair, incomes rose more or less across the board in 2022/23. Take those spectacles off and things look far less pretty. An inflation rate of 7.8% (CPIH) in the year to April 2023 means every percentile faced a real terms pay cut.”
After-tax income growth by percentile
The HMRC figures highlight incremental growth in income across various percentiles:
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1st percentile: £12,800, up 0.8% from £12,700
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5th percentile: £13,800, up 0.7%
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10th percentile: £15,000, up 1.4%
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25th percentile: £18,700, up 2.7%
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50th percentile (Median): £25,500, up 4.1%
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75th percentile: £37,400, up 3.6%
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90th percentile: £52,700, up 3.1%
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95th percentile: £68,700, up 2.7%
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99th percentile: £132,000, up 1.5%
Despite this upward trend, rising prices across the economy outpace income growth for all brackets, effectively reducing household purchasing power.
Tax burden increasing for higher earners
HMRC’s data also sheds light on how the UK tax burden is distributed among different taxpayer groups. The 2022/23 tax year marks a continued trend of higher earners contributing a disproportionately larger share of total income tax:
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Additional rate taxpayers (1.7% of all taxpayers) paid 34% of the total tax
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Higher rate taxpayers (14.8%) contributed 34.7%
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Basic rate taxpayers (81.7%) paid 30.9%
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Savers rate taxpayers (1.8%) accounted for just 0.4% of tax
In comparison to 2021/22, the share of tax paid by higher rate taxpayers increased from 32.6% to 34.7%, and their proportion among all taxpayers also rose from 13.4% to 14.8%. Meanwhile, the basic rate taxpayer group declined slightly from 83.2% to 81.7%.
Policy implications and the effect of frozen tax bands
Hyett notes that although the current figures are from 2022/23, they reflect an ongoing pattern that is likely accelerating:
“These numbers might be a little dated – but they show a trend that is only likely to have accelerated over the last few years. Frozen tax bands are designed to slowly and stealthily push people into higher tax bands and increase the amount of tax they pay. Unfortunately, the middle income bracket will continue to see itself squeezed by the taxman for the foreseeable future.”
The effect of frozen tax thresholds, amid inflation, means more individuals are being pushed into higher tax brackets despite only modest increases in nominal income. This form of fiscal drag is resulting in a silent tax increase for many earners, particularly in the middle-income segment.
About Wealth Club
Founded in 2016 by former Hargreaves Lansdown director Alex Davies, Wealth Club has grown into the UK’s largest non-advisory investment platform focused on tax-efficient investments such as Venture Capital Trusts (VCTs), Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS), and AIM Inheritance Tax ISAs.
Wealth Club serves over 65,000 members and has facilitated investments exceeding £1.5 billion across its offerings. In addition to these services, the firm launched Managed Portfolios for experienced investors and, in 2024, became the first to offer a private markets fund supermarket tailored to High Net Worth or Sophisticated Investors.
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