Average income tax by area: The parts of the UK paying the most tax mapped

Taxpayers in the London borough of Wandsworth paid more income tax than those in Leeds and Birmingham combined in 2022/23, according to new HMRC figures that lay bare the stark differences in tax take across the UK.

Residents of Wandsworth paid £4.26 billion in income tax that year. This was more than both Leeds and Birmingham, which together paid £4.23 billion.

Taxpayers in the London borough of Hackney, who paid £1.54 billion in income tax in 2022/23, contributed more income tax than the whole of Scotland’s second city Glasgow, where residents paid £1.35 billion.

Try 6 free issues of MoneyWeek today

Get unparalleled financial insight, analysis and expert opinion you can profit from.

Start your trial

Sign up for MoneyWeek’s free twice-daily newsletter.

Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.

Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.

Sign up

Overall, London and the South East contributed 45% of the UK’s total income tax bill of £240.7 billion in 2022/23, according to analysis of HMRC figures by accountancy firm UHY Hacker Young.

The capital on its own accounted for a quarter of all income tax paid (26.5%).

According to UHY Hacker Young’s research, all top 20 areas in the UK for the highest tax per capita are in London or the South East, in part due to frozen tax thresholds and fiscal drag.

Neela Chuahan, partner at UHY Hacker Young, said: “London and the South East now account for almost half of the UK’s entire income tax take. Obviously, that reflects the sheer concentration of high earners in the South East but it also reflects years of tax policy geared towards shifting more of the tax burden onto higher earners.”

Source: UHY Hacker Young based on HMRC data

A decade of income tax rises

Over the past ten years since April 2016, London’s income tax contributions have jumped 80.7% from £35.3 billion to £63.8 billion. This compares with a 48.4% increase for the rest of the UK, the analysis showed.

Because London and the South East are home to a disproportionate number of high earners paying tax at the 45% rate, the areas consistently contribute a larger share of income tax than other parts of the country.

Increasing numbers of taxpayers in the capital and the South East have seen their tax bills rise as the threshold for the 45% additional rate tax was lowered from £150,000 to £125,140 in April 2023.

Around 232,000 would pay the additional rate of tax who would not have done so had this threshold been maintained at £150,000, according to government estimates at the time.

For those with income between £125,140 and £150,000, the average cash loss was £621 in 2023 to 2024. For those with income above £150,000 the average cash loss was £1,256.

At the same time, personal allowances and higher-rate thresholds have been frozen since April 2021, dragging more and more people into higher tax bands as incomes increase, a process known as fiscal drag.

Chauhan added: “Freezing allowances and lowering the additional-rate threshold has pulled ever more taxpayers into higher bands, driving a sharp rise in revenues from London in particular – up more than 80% over the past decade.”

“While this underlines how dependent the Exchequer has become on London and the South East, it also raises concerns about the long-term competitiveness of the UK tax system and the risk that persistently higher tax burdens could push some high earners to relocate abroad or reduce their economic activity,” she said.

Source: UHY Hacker Young based on HMRC data