London's income tax bill has surged to a record of nearly £80 billion a year, according to official figures showing that the capital's taxpayers handed the Treasury £79.2 billion in income tax in 2024/25.
That was £6.9 billion more than in the previous year and £19 billion higher than in 2021/22, when then Chancellor Rishi Sunak introduced the "stealth tax" of freezing the thresholds for paying income tax.
Hundreds of thousands of people in London and its commuter belt have been dragged into paying the basic and higher rates of income tax by the threshold freeze, which Rachel Reeves extended for a further three years until 2031.
Tax rates and new PM's stance
The 20% basic rate of income tax is paid on income from £12,571 to £50,270, and the 40% higher rate on income from £50,271 to £125,140.
New Prime Minister Andy Burnham has not ruled out more tax rises as he presses ahead with his radical reforms for Britain, including the biggest "devolution of power in modern times".
He has signalled that he may increase levies on the better off to fund measures to ease the cost of living for millions of households struggling to make ends meet.
Property tax plans
Mr Burnham has previously supported a new property tax, to replace council tax and stamp duty, which would land the capital with an extra £7.5 billion bill. But the PM has made clear that he has no plans to imminently introduce such a major homes tax shake-up.
He has backed Ms Reeves' new "mansion tax," due to come into force in 2028 on homes worth £2 million and more, which will hit London and the South East hardest. The new levy is being partly blamed for a 25% slump in the average house price in central London.
London's fiscal surplus
The official figures also show the capital's annual "bail-out" of the rest of the country has ballooned to a record £49 billion.
The Office for National Statistics data details how the capital contributed almost £240 billion in taxes to the Treasury in 2024/25, but benefited from only £165.5 billion in public spending.
After items such as capital expenditure and depreciation are taken into account, London's "fiscal surplus" for the Government totalled an all-time high of £48.8 billion, up from £45.3 billion the previous year. The figure has more than doubled in less than a decade as successive Chancellors have loaded taxes on the capital as they have struggled with the public finances.
Only one other region, the South East, also makes a net contribution to the Exchequer. All other English regions, as well as Scotland, Wales and Northern Ireland, receive more in public spending than they contribute in tax.
The biggest net recipient is the North West, the region that includes Mr Burnham's Manchester heartland and Makerfield constituency, which had a fiscal deficit of £39.5 billion in 2024/25.
The fiscal surplus for London, which has the highest unemployment in the country, equates to a record £5,374 per head being paid to the Treasury. By contrast, Mr Burnham's North West received a net subsidy equivalent to £5,162 per head.
