Methodology

Tax Calculator

The ASI Average Tax Calculator models how an individual’s direct taxes are calculated under the England-only 2025/26 tax code, and how those taxes flow into major areas of public spending. It deliberately excludes all indirect taxation — including VAT, excise duties, fuel duties, alcohol duties, business rates and council tax — because these taxes cannot be reliably attributed to individuals and would dilute the link between personal income and public-service funding.

1. Scope and Data Sources

All tax logic is taken directly from gov.uk / HMRC 2025/26 rules, covering, for example:

• Income Tax thresholds and rates

• National Insurance (Class 1 employee & employer; Class 4 for self-employment)

• Personal Allowance and taper

• Blind Person’s Allowance (BPA)

• Marriage Allowance

• High Income Child Benefit Charge (HICBC)

• Personal Savings Allowance and Starting Rate for Savings

• Dividend Allowance and rates

• Capital Gains Tax (CGT)

Public spending allocations are sourced exclusively from the ASI’s Where Does It All Go? partnership, which itself draws from HM Treasury, the Office for Budget Responsibility (OBR), and official gov.uk datasets.

Revenue and expenditure for student loans, devolved governments, and public corporations have been broadly excluded because they are largely self-funding and/or consist largely of capital expenditure funded out of borrowing. These flows do not reflect annual tax-funded programme spending and cannot be meaningfully attributed to individual taxpayers.

2. Building Taxable Income

The calculator models all core direct-income components:

• Employment income — taxed via Income Tax and Class 1 NI; Employer NI is calculated and can be optionally shown.

• Self-employment profits — taxed through Income Tax and Class 4 NI. Class 2 NI is treated as “deemed paid” and adds no cost.

• Savings and dividends — processed under PSA, the starting rate for savings, the Dividend Allowance, and the correct marginal rates.

• Capital gains — CGT applied using the 2025/26 bands and annual exempt amount.

Adjusted net income is used where required (e.g. HICBC and PA taper).

3. Allowances, BPA, HICBC and Marriage Allowance

• Personal Allowance (PA): full until £100,000, then tapered until extinguished at £125,140.

• Blind Person’s Allowance (BPA): an extra £3,130, not tapered, and does not alter the PA taper threshold.

• HICBC: applied from £60,000, fully removes Child Benefit by £80,000.

• Marriage Allowance: included where applicable and used to increase the recipient partner’s PA.

• Trading Allowance: for simplicity and consistency, the calculator assumes that self-employed users claim no business expenses. To avoid mis-estimating taxable profits — especially in cases where users are unsure of deductible costs—the model applies the Trading Allowance automatically.

4. Pension Contributions

Two pension mechanisms are modelled:

Employee Pension Contributions (Net Pay Arrangement)

• Entered as a percentage of gross salary

• Reduce taxable income before Income Tax

• Do not reduce NI

• Apply to employment income only

Pension via Salary Sacrifice

• Contractual reduction of salary

• Reduces taxable pay, employee NI, employer NI, and adjusted net income

• Assumed fully HMRC-compliant

No other pension reliefs are modelled.

5. Tax Calculation and AETR

The Average Effective Tax Rate (AETR) is: Total Direct Tax / Gross Personal Income

Employer NI is included only when toggled.

Indirect taxes remain wholly excluded.

6. Spending Allocation

Total direct tax is mapped to spending categories using fixed proportions from the Where Does It All Go? dataset.
For simplicity the calculator’s infographic groups expenditure into three pillars:

• Welfare

• Health

• Education

Constituency Outcomes

This analysis uses constituency-level estimates of annual tax paid and annualised income based on ONS data.

Effective tax rates were calculated as:

Effective Tax Rate = Annual Tax / Annual Income

Three groups were identified:

• Top 10 constituencies: highest annual tax per resident (mean = £18,223.40; tax rate = 26.51%).

• Median constituency: annual tax per resident = £7,040; tax rate = 18.67%.

• Bottom 10 constituencies: lowest effective tax rates (mean = 16.00%).

Percentage differences in tax paid were calculated using:

(Top 10 Mean − Median) / Median × 100

yielding 158.9%, meaning the wealthiest constituencies pay 2.6 times as much tax per resident as the median:

18,223.40 / 7,040 = 2.589

Differences in effective tax rates were calculated using:

(26.51 − 16.00) / 16.00 × 100

showing that the richest constituencies pay tax at 66% higher rates than the poorest, while the poorest pay rates around 40% lower than the richest.

All comparisons reflect per-resident averages, demonstrating the degree of progressivity in England’s tax system.