Home Accounting and Auditing Millennials pick up income tax burden from elderly

Millennials pick up income tax burden from elderly

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Research by Moore Stephens shows that the tax burden on the older generation has fallen by 4% in the past year, with millennials paying an extra £5bn compared to the same period in the previous year, reports Accountancy Daily.

According to the figures, recent changes in tax policy have accelerated a process caused by a shift in demographics. Increases to stamp duty land tax (SDLT) have largely been avoided by older generations, which are less likely than millennials (those born between 1977 and 1996) to move into a new property. The tax recovered from SDLT rose to £11.7bn, up 10% from £10.6bn in 2015-16.

Additionally, changes to national insurance contributions (NICs) for higher earners and restrictions on the amount that an individual can save tax-free through pensions have disproportionately impacted younger people. Changes to pension rules mean that pensioners no longer need to buy an annuity, which means that those in the post-retirement age bracket now avoid paying tax on annuity income.

Baby boomers (born between 1946 and 1965) paid £63bn in income tax in 2015-16, representing 38% of the overall intake, a 2% decrease on the year before. By contrast, millennials paid £41.4bn, a 14% increase. They now contribute 25.1% of the total take (£163.8bn).

The amount of tax paid by those born between 1965 and 1977, known as generation X, has remained approximately static at 36% of the total for every tax year from 2011-12 to 2015-16.

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

 ‘Younger generations are also likely to face the cost of funding the increased care that come with an aging population.

 ‘Making the tax system fair for all is a tough ask – but the numbers suggest millennials may have grievances. For example, the overall SDLT burden is causing noticeable strains.’

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