Danny McCance 7 Jan 2019 11:18am

Tax burden falls on shoulders of millennials

Millennials are taking up the income tax slack as the amount paid by baby boomers decreased by 6% between 2011 and 2016

Between March 2015 and 2016, baby boomers paid a total of £63bn in income tax, while millennials paid £41.4bn, according to accountancy firm Moore Stephens.

However, the proportion of overall income tax paid by baby boomers – those born between 1946 and 1965 – decreased from 44.6% in 2011/12 to 38.2% in 2015/16.

Meanwhile, the proportion paid by millennials – born between 1977 and 1996 according to Moore Stephens – increased from 19.2% to 25.1% in the same period.

There was however, only a small shift in the proportion paid by generation x – born between 1965 and 1977 – from 36.2% to 36.6% – paying £51.2bn and £60.3bn in 2011/12 and 2015/16 respectively.

A factor in the shift is a change in demographics. As baby boomers move into retirement their taxable income decreases, whereas millennials begin to move into higher paid, and therefore higher taxed, positions.

However, changes to tax policy are also highlighted as disproportionately affecting the younger generation, including increases in stamp duty land tax (SDLT) – which has risen from £10.6bn in 2015/16 to £11.7bn last year – as the older generation is seen as less likely buy new properties.

In addition to restrictions on how much can be saved tax free in pensions, increases in tax and national insurance on higher earners, as well as changes to annuity rules which mean pensioners can avoid taxes on annuity income.

“As baby boomers continue to retire, the tax burden will shift to millennials at an even more dramatic rate in the coming years, said Francis Moore, associate director at Moore Stephens.

“Younger generations are also likely to face the cost of funding the increased care that come with an aging population,” Moore added.

“Making the tax system fair for all is a tough ask – but the numbers suggest millennials may have grievances. For example, the overall Stamp Duty Land Tax burden is causing noticeable strains.”

In August, the Local Government Authority suggested a 1p increase in the basic income rate could generate an additional £4.4bn towards social care for the elderly, and address “decades of failure” in finding a sustainable model of funding.