- But only 69p of tax bill comes from work
- MetLife research shows tax risks are one of the biggest retirement planning worries
Employees are paying an average £1.25 an hour in direct and indirect tax with the daily contribution to the Government amounting to more than £30, new analysis* from MetLife shows.
But only 69p an hour of the average worker’s tax bill is due to direct deductions from earnings including income tax and National Insurance with the rest mounting up from charges including VAT on spending, council tax and duty on a range of daily essentials.
Indirect taxes cost the average person nearly £5,000 a year – or 56p an hour – while income tax and National Insurance cost around £6,000. The average direct and indirect tax bill adds up to more than £11,000 – the equivalent of 40% of average earnings, the analysis of Government data shows.
The daily tax bill peaks at £35 – nearly £1.50 an hour – for employees aged 40 to 49 while those aged between 18 and 21 only need to pay £6.47 a day or just 27p an hour. Employees aged 60-plus see their tax bill drop to around £23 a day.
Male workers enjoy higher salaries on average – and pay nearly double the direct and indirect tax that women pay – the average tax gap between men and women at £6,430. The average male employee pays £14,196 compared with £7,762 for women.
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The impact of tax while working highlights the need to make saving for retirement as tax efficient as possible and underlines the risk of running up unnecessary tax bills when planning for retirement, MetLife believes. Its own research** shows early six out of 10 savers (58%) fear they will pay more tax on their savings than they need to with tax risks one of biggest worries about planning for retirement.
Simon Massey, Wealth Management Director at MetLife UK said: “Paying tax is one of the certainties of life and we all benefit from the work that central and local Government are able to do as a result.
“However £1.25 an hour adds up to a considerable amount over a lifetime and should help concentrate savers’ minds on how to ensure they are benefiting as much as possible from tax-free savings such as ISAs and tax breaks such as contributing to a pension.
“Paying too much tax at retirement is a major worry for savers which should encourage people to seek expert advice on retirement income and to look for retirement saving solutions that will provide certainty over income and flexibility over capital in retirement.”
MetLife’s Guaranteed stocks and shares ISA offers a choice of income or capital guarantees with savers who invest in the Secure Income Option able to take a guaranteed level of income for life from age 55 while customers who use the capital guarantees have the certainty of a guaranteed amount at the end of their chosen term.
MetLife’s Retirement Portfolio, has been specifically designed for pension freedoms providing a choice of income and capital guarantees.
The flexible guaranteed drawdown plans offers the potential for daily lock-ins of investment gains while enabling savers to start, stop and restart their income to suit their personal needs. Customers can choose from a range of investments to build a personalised retirement plan suited to the levels of risk they are willing to take while having the choice of a valuable guaranteed level of income for life or a guaranteed capital sum at retirement.