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Importers recovering from post-Brexit tax confusion – but sole traders and property market struggling under increased tax burden

HMRC’s takings increasing faster than inflation

Stats showing HMRC’s takings for the year to February 2024 reveal that importers are recovering from post-Brexit tax confusion – but sole traders and the property market are struggling under an increased tax burden.

Simon Sutcliffe, a Partner and Customs & Excise Duty expert said:

Customs duty receipts have fallen again, as we move on from the initial flurry of post-Brexit retrospective debt action taken by HMRC against importers who were naturally unsure and confused as to their true customs liabilities in the aftermath of the UK’s departure from the EU. This caused a peak in customs revenue post-importation; however, businesses now seem to understand how the tariff preference system works, utilising the extra FTAs, and are planning their supply chains much more carefully and efficiently.

Joe Neil, Private Client Manager said:

HMRC’s total takings continue to increase faster than inflation, showing the increased tax burden being put on the country.

The total income tax takings have increased by over 10% in the year to February 2024 in comparison to the previous 12 months. Interestingly, PAYE takings have increased by 11.9% in the period, whilst income tax collected through self-assessment has decreased by 1.7%. This shows that the increase in income tax takings is due to salaried employees, with the average wage increase in the year to January 2024 being only 6.1%, a 11.9% increase in tax is showing the effects of fiscal drag and employees are being pushed into higher tax bands and are losing a bigger proportion of their salaries to tax.

More worryingly, the decrease in self-assessment income tax receipts means sole traders and partnerships are becoming less profitable. This is likely a result of increased inflation, causing small businesses to have higher direct costs and salary expenses. The government announced £200m of funding to support small businesses in the Spring Budget; Jeremy Hunt is hoping that this is sufficient to support the UK economy through this current period.

Heather Powell, Head of Property and Construction said:

HMRC’s statistics show a fall of £3.9bn (25%) in the Stamp Duty Land Tax (SDLT) paid in the last 12 months. The reasons for this fall are well known – the rise in interest rates has seen a huge fall in the number of homes purchased, and investors in commercial property (offices, retail units, etc) are holding back due to uncertainty about the occupancy of offices and the maintenance of value across the sector.

The Chancellor missed the opportunity to stimulate the sector in his budget on March 6th – instead, he added to SDLT payable by investors with the removal of ‘Multiple Dwellings Relief’ – is this something he will live to regret?

Sean Randall, a Partner who specialises in Stamp Duty, said:

Last year’s drop in stamp duty revenue has to be considered against a market buoyed by low-interest rates over prior years. This is back to reality. The abolition of multiple dwellings relief from June and a return to the pre-stamp duty holiday thresholds in 13 months will continue the trend unless interest rates reduce significantly.

Would you like to know more?

If you have any questions about the above or would like to discuss your specific circumstance, please get in touch with your usual Blick Rothenberg contacts using the links in the profiles below.