The number of higher-rate income taxpayers is expected to double to around two-thirds of all taxpayers by the 2075/6 tax year, according to new analysis from the Office for Budgetary Responsibility.
Assuming the National Living Wage remains constant as a share of the median wage, a full-time National Living Wage earner would become subject to the higher rate of income tax from the late 2060s.
Around a quarter of the current population are currently higher-rate taxpayers, according to the Office for Budget Responsibility’s latest Fiscal Risks and Sustainability Report.
Another area of revenue expected to skyrocket for the Government is Inheritance Tax receipts. The OBR predicts IHT revenues to double to 0.4% of GDP by 2030 to 0.9% of GDP by 2075.
The OBR data also highlighted the ongoing effects of increasing longevity. In its baseline scenario, it predicted that the median age will rise from 40 to 49 by 2075, with the modal age jumping from 34 to 63.
Life expectancy growth is however expected to slow, with an average life expectancy of 86.5 years by 2075 (2025: 81.5 years), a slightly lower increase than over the past 50 years when it rose around 9 years.
Despite the slowing in life expectancy, the old-age dependency ration is set to reach 40% by 2075. The ratio compares the proportion of the population at or above the pension age in relation to the rest of the adult population. This is a considerable increase to the ratio which has held steady since the 1970s at around 30%.
Perhaps unsurprisingly this is expected to place considerable pressure on the State Pension which is predicted to rise to 5% of GDP by 2030 and to 9% by 2075. This assumes that the State Pension triple lock is maintained.
The OBR also noted that it expects an increasing number of those reaching retirement age to continue working. Among 65 to 69 year olds it expects the participation rate to increase from under 30% in 2025 to 45% by the mid-2040s, with the participation rate for over 70s rising from 7% to 10%.