The amount of income tax paid by millennials hit a “record” high in the UK last year, soaring 13.4% to £34.4bn, up from £30.4bn the previous year.
According to UHY Hacker Young, millennials and Generation-Z may be facing even higher tax bills in the future to cover increased Government spending in response to the coronavirus crisis.
It comes as the Office for Budget Responsibility estimates the Government could spend as much as £300bn over the next year alone.
UHY Hacker Young warned that millennials already face increased tax bills due to “fiscal drag”, whereby tax and national insurance brackets increase at a slower rate than inflation, putting more millennials onto higher tax rates.
The firm also warned that millennials are more likely than baby boomers to be affected by future tax rises, such as NICs. It comes as older generations are more likely to have already retired, so would not pay NICs on their income.
The amount of income tax paid by millennials has now increased 78% over the last five years, up from the £19.3bn reported in 2013/14.
At the same time, even younger generations are facing “significant” increases in income tax bills, with Generation Z witnessing a 112.9% increase to £0.35bn last year.
Generation X currently has the biggest income tax bill at £79bn, increasing 5% from the year prior. The income tax bill for baby boomers fell by 2% to £55.5bn over the same period, however.
Neela Chauhan, partner at UHY Hacker Young, said: “Rising salaries and static tax brackets mean millennials are paying more in income tax than ever before.
“Massive coronavirus stimulus measures will have to be paid for at some point and it is likely that this will be done through higher future tax rates. This means that millennials and Generation Z will pick up most of the tab.”
She added: “To help ease the burden on millennials, the government needs to more regularly review income tax brackets.
“Failing to do this regularly enough cuts into the disposable income of millennials and in turn, reduces their ability to save or pay down debts.”