Speculation that the Chancellor could make changes to income taxes to grow the Treasury’s coffers has been rife ahead of the Budget on Wednesday
Sir Keir Starmer has refused to rule out extending a freeze on income tax thresholds in next week’s Budget.
Speculation that the Chancellor could make changes to income taxes to grow the Treasury’s coffers has been rife ahead of the Budget on Wednesday.
Rachel Reeves was initially said to be looking at an increase in income tax rates, but the move was reportedly dropped after the Chancellor was reportedly handed an improved economic outlook from the Office for Budget Responsibility.
Instead, she could look at adjusting the thresholds at which people pay the higher and additional rates of tax, which would also bring in more revenue.
Here, The i Paper takes a look at how income taxes in the UK compare with other countries.
How the UK compares
The income tax take in the UK is bigger than in most OECD countries.
The UK’s personal income taxes were worth 10.61 per cent of GDP in 2023, according to the most recent data from the OECD.
Britons pay less in income tax than the residents of Denmark, Canada and Italy, but more than those in Germany, the US, France and Spain.
Among G7 countries, Japan has the lowest income tax take, at just 5.96 per cent of GDP.
The average British worker, who earns £39,039 a year before tax, pays a tax rate of 20 per cent on their earnings after using up their personal allowance.
The UK’s income tax rates go up to 45 per cent (see table).
Denmark
Denmark’s income taxes are bigger, as a proportion of GDP, than those of any other OECD country.
At 24.79 per cent of GDP, the income tax burden is more than double the UK’s.
Danes pay both national and local income taxes.
The average Dane earns DKK 620,100 according to Statistics Denmark.
The bottom national income tax rate is 12 per cent, while the top tax rate is 15 per cent for income of more than DKK 611,800 after an 8 per cent labour market tax is paid.
Municipal tax rates vary across areas, but the country average is 25 per cent, according to accountancy firm PwC. They are calculated at a flat rate.
Denmark caps the top marginal tax rate at 52 per cent.
US
There is no personal allowance in the US.
For single taxpayers, income taxes start at 10 per cent on amounts under $11,925.
The top rate is 37 per cent on incomes of at least $609,351.
The national average wage in the US was $69,800pa in 2024, according to the Social Security Administration.
The average worker pays 12 per cent on income from $11,601 to $47,150 and 22 per cent on income from $47,151 to $100,525.
On top of national income taxes, many states levy their own rates.
For example, in Washington, DC, residents pay taxes which start at 4 per cent on incomes below $10,000.
For incomes over $60,000 but below $250,000, the tax is $3,500 plus 8.5 per cent of the excess over $60,000.
The US allows married couples to be taxed jointly or separately.
Canada
The median average income in Canada was CAD $45,400 in 2023, according to Statistics Canada.
The country has a starting rate of 14 per cent on taxable income that is $57,375 or less. Canada lowered this rate from 15 per cent in July 2025.
Income between $57,376 and $114,750 is taxed at 20.5 per cent.
The highest tax rate – 33 per cent – applies to income over $253,414.
Germany
In Germany, income taxes range from 0 per cent for income under €12,096 to 45 per cent for income above €277,825.
Taxable income tax threshold ranges change depending on marital status.
The average full-time employee earned €53,748 a year in 2023, according to the Federal Statistics Office.
Incomes between €12,096 and €68,429 are taxed at 14 to 42 per cent, with rates going up in relation to incomes, according to PwC.
Members of officially recognised churches pay church tax as a surcharge on their income tax. The rates are 8 or 9 per cent of the income tax, depending on where the person resides.
Germany has been levying a 5.5 per cent solidarity surcharge tax on income taxes to help pay for infrastructure and economic improvements in certain regions in need.
France
In France, income taxes are levied on households rather than individually.
Most married couples are required to file a joint tax return.
The average salary in France was €39,100 in 2022, according to the National Institute of Statistics and Economic Studies.
Income tax rates are progressive from 0 to 45 per cent, plus a surtax of 3 per cent on the portion of income over €250,000 for a single taxpayer (€500,000 for a married couple), and a surtax of 4 per cent for income over €500,000 (€1m for a married couple.
Income from €29,316 to €83,823 is taxed at 30 per cent.
Rates drop in accordance with how many children someone has. Those with more children have bigger tax breaks.
Japan
In Japan, the average annual income was 4.6 million yen (£22.4k) in 2023, according to the National Tax Agency.
Income tax rates range from 5 per cent on incomes below 1.95 million yen to 45 per cent on incomes above 40 million yen, according to PwC.
Incomes between 3.3 million yen and 6.95 million yen are taxed at 20 per cent.
A surtax of 2.1 per cent took effect in 2013.
A local inhabitant’s tax is also imposed at a flat rate of 10 per cent.
Italy
In Italy, residents pay national, regional and municipal income taxes.
National income taxes range from 23 per cent for income under €28,000 to 43 per cent on income above €50,000.
A rate of 35 per cent applies to incomes between €28,001 and €50,000.
There is an additional tax applicable to bonuses, stock options and other incentives paid to executives or managers in the financial sector.
A productivity bonus is subject to a flat tax.
Regional income tax varies from 1.23 per cent to 3.33 per cent depending on the area.
Municipal income tax ranges from 0 per cent to 0.9 per cent.
Spain
In Spain, there are state tax rates as well as regional rates that vary across the country.
State tax rates range from 9.5 per cent on income below €12,450 to 23.5 per cent on incomes above €300,000, according to HSBC.
The average monthly salary in Spain was €28,627 a year in 2024, according to the Spanish Statistical Office.
Incomes from €20,201 to €35,200 attract a state income tax rate of 15 per cent.
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