All of Europe’s income tax rates compared – where does the UK fall?

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As the news of tax rises in the UK has caused anger among the working population, it turns out that the UK worker is not one of the biggest taxpayers in Europe, with a number of other countries paying higher rates. While Income Tax has not been raised by the Chancellor despite the coronavirus crisis, National Insurance has been increased by 1.25 percentage points beginning in April 2022.

Income tax is the tax you pay on your earnings, but UK taxpayers get a Personal Allowance of tax free income, set as £12,570 for this financial year.

Income tax is sorted into three bands in the UK – basic rate, higher rate, and additional rate.

Those who earn £12,571 to £50,270 pay an income tax rate of 20 percent, whereas those earning £50,271 to £150,000 pay 40 percent.

Those on the additional rate, who earn more than £150,00 per year, pay a tax rate of 45 percent on their earnings.

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While income tax in the UK is not generally considered to be extortionate, there are countries whose workers pay a lot more than UK workers do.

The income level at which the top statutory personal income tax rates apply also varies significantly across the countries that make up Europe.

The countries with the top ten highest rates include:

  1. Finland
  2. Sweden
  3. Denmark
  4. Austria
  5. Netherland
  6. Belgium
  7. Slovenia
  8. Ireland
  9. Portugal
  10. Iceland

According to the Statista graph below, where you can see the full breakdown, the UK comes in joint 12th place alongside Spain, France, Germany.

Germany has a threshold of 47.5 percent for high earners – specifically those earning more than €282,934 per year.

The German income tax is a progressive tax, which means that the average tax rate – ie, the ratio of tax and taxable income – increases monotonically with increasing taxable income.

Our neighbours in Ireland pay a marginal income tax rate as high as 48 percent, using a similar model to here in the UK, where the taxation of earnings is progressive, with little or no income tax paid by low earners and a high rate applied to middle and top earners.

Countries with very high top income tax rates include Slovenia, with 50 percent, and Austria, with 55 percent.

However, Austria’s top statutory rate of 55 percent only applies to those with an income above €1 million.

Tax rates are also high in Denmark, which has a 55.4 percent top statutory personal income rate.

Sweden has a developed post-industrial society with an advanced welfare state and the highest income tax rate in the world, with as much as 57.1 percent deducted from annual income.

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Some countries pay considerably lower than the UK and other large economies like Germany.

In the Czech Republic, the top rate of personal income tax is as low as 15 percent, as do Hungarians.

However, in the Czech Republic and Hungary, this is applicable to all workers no matter how much they earn, as it is a flat tax rate.

Similarly, Estonians only have to pay as high as 20 percent – some 25 percentage points less than the British.

But you only have to be earning €6,097 to pay the proportional flat tax rate in this Northern European country.

Mid rankers include Slovakia, which has a personal income rate of 25 percent, and Poland, which has a top rate of 32 percent.

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