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HMRC tax take stabilises, but is lower than before

The overall tax take by HM Revenue & Customs (HMRC) over the past year has now stabilised at £607 billion – stopping the freefall during the early months of the pandemic says Robert Pullen (Partner, Private Client).

Public finances took a battering when the first lockdown was imposed – with the tax take plummeting between February and April 2020 by over £28b. This continued throughout the early part of the summer until September 2020 with a further drop of just over £43b.

Since then, however, business and individuals appear to have adapted so that even during the subsequent lockdowns and tiered restrictions, the tax HMRC has collected has held ground, with only a £500m difference between the year to April 2020 (£607.8b) and the year to April 2021 (£607.3b) – albeit still lower than the year to April 2019 (£623.3b).

There was strong growth year-on-year in the months February to April 2021, increasing by over £39b compared to the year before and more than reversing the reduction at the time. As such, and if the upward trend continues into May 2021 it is possible the immediate financial implications on the tax-take caused by the pandemic will be reduced over the next few months.

Of note is the resilience in the Pay As You Earn and National Insurance Contributions receipts which have actually increased over the last year despite the disruption. VAT is also holding up strongly with receipts in March 2021 similar to that seen in March 2019.

There has been a recent uptick in Stamp Duty Land Tax (SDLT) and property transactions, most likely reflecting the time-limited SDLT incentives. Customs Duties also appear to have rebounded in March, being higher than in either of the prior two years for that month.

Two of the fastest growing taxes over the last year has been Inheritance Tax and Capital Gains Tax. Both taxes have been rumoured to be in the Chancellor’s sights and the increased tax collection could be a reflection of individuals accelerating gifts or realising asset values by making disposals.

At a combined £16.5b, the tax take from these taxes is relatively small compared to Income Tax (£200b) and Corporation Tax (£50b) and so unlikely to make a big difference in the country’s finances if the Chancellor does make changes to the tax regime.

Would you like to know more?

If you would like to discuss the above or how it may affect you, please get in touch with your usual Blick Rothenberg contact or Robert Pullen, using the details on this page.

For any press queries, please contact David Barzilay whose details are to the right.