The total HM Revenue & Customs (HMRC) receipts for the month of September were £4 billion more (£47 billion) than the September 2019 (£43 billion) receipts. This was mainly buoyed by a £3.3 billion increase in Corporation Tax receipts as well as increases in Pay as You Earn (PAYE) tax (plus £572 million) and National Insurance Contributions (NIC) (plus £731 million) receipts from the previous September.
Although it is good to see, it is important not to read too much into one month’s figures, and it certainly shouldn’t be seen as a turning point. In many ways this could be a fluke in terms of the statistics because even looking at what taxes has made this a good month, i.e. for the Corporation tax receipts in particular, the total tax take from this is still £3.1 billion down over the course of the last 12 months (£57.5 billion in 12 months to the end of September 2019 and £54.4 billion in the 12 months to the end of September 2020).
PAYE and NIC have stabilised, but these figures include furloughed workers wages, and both are still down over the course of the last 12 months (£2.7 billion and £672 million respectively). Although the Job Support Scheme is now replacing the furlough scheme, we could be seeing further falls in receipts from these two taxes in the coming months as many businesses won’t be able to sustain the longer-term impact of the virus on their profits.
The six months from the beginning of April to the end of September have seen a £65 billion decrease in the total tax take. If that continues at the same pace, the Treasury could be looking at a £130 billion shortfall in the total tax take of the country by the end of March 2021. That would be an incredible 20.5% drop from the prior tax year’s tax receipts.
Although this is alarming, the end result may not be as bad as VAT receipts are gradually moving towards the normal monthly levels.
We are seven months on from the beginning of lockdown now and businesses have adapted as have people and with many new businesses springing up to meet new demands and needs arising out of the crisis. There is a long road to recovery ahead, and we may be seeing the start of this in the statistics.