How much is our work taxed in the UK compared to other countries?

The OECD (Organisation for Economic Co-operation and Development) recently released its latest Taxing Wages 2022 report, and it’s interesting to see where the UK falls compared to other developed nations when it comes to tax. One of the purposes of this particular paper was to look at the impact of Covid-19 on how workers were taxed across 38 different nations – and it makes for interesting reading!

The UK’s ‘tax wedge’ falls just below the OECD average

The ‘tax wedge’ is the gap between what the employer pays for labour and what the worker takes home, and there’s an enormous range between nations. In Belgium, workers lose 52.6% of their income to taxes, while in Colombia it’s zero.

Here in the UK, the tax wedge in 2021 was 31.3%, only marginally lower than the OECD average of 34.6%. The tax wedge figures for other European nations are generally higher, with countries like France and Germany both promoting a ‘high taxation and high public spending’ approach to providing state welfare.

In the UK, however, the current Conservative government has habitually aimed for a ‘low tax, high growth’ maxim. Good news for business investment and personal wealth management – not so great when it comes to finding the funds to get the UK out of austerity.

Interestingly, our Commonwealth partners, Australia and New Zealand, both have much smaller tax wedges. Australia’s main tax wedge was 27.1% and Kiwis only paid 19.4%!

Here are a few other countries’ tax wedge numbers, to put things in perspective.

2021 tax wedge by country

• Belgium - 52.6%
• France - 47%
• Netherlands - 35.3%
• OECD average - 34.6%
• United Kingdom - 31.3%
• United States - 28.4%
• Australia - 27.1%
• New Zealand - 19.4%
• Colombia - 0%

You can see the full table here.

Starting a family cuts your tax – but not by much in the UK

Across all 38 nations analysed, families with children pay a lower tax wedge than single earners without children. The average was 24.6% for single-earner families with children, compared to 28.8% for double-earner families with children and 34.6% for individuals without children.

In the UK, there was less of a pronounced gap. The single-earner family tax wedge was 27%, while the double-earner family was 27.2% and the single person tax wedge was 31.3%.

Are you paying the right amount of tax?

If you think that you may not be paying the right amount of tax, give us a call or send us an email. We can talk to you about how you structure your business and personal assets, and ways to help you only pay the tax you need to pay.