A large part of this relates to taxes deferred, particularly in relation to VAT (£38.7 billion fall for the first six months) where businesses were permitted to defer all payments due for a period. Some of this cash will come back over the next couple of years.
The fall in Corporation Tax is huge – almost £12 billion over the first six months, suggesting total Corporation Tax receipts will be down by more than a third over the year as a whole. In October alone, receipts were down by almost £7 billion, although this was partly offset by about £3 billion higher receipts from the largest companies in September due to a change in their payment pattern.
As businesses head into a difficult winter, tax receipts are likely to stay low for the rest of the year. In many cases, losses in 2020 will generate tax repayments for the previous year, so there is little good news to come for Government coffers over the coming months.
For Income Tax, the critical month will be January which is the main payment date for Self-Assessment. In January 2020, tax receipts were about £50 billion in that month alone – it is hard to predict how much lower that will be by January 2021. Overall, Mr Sunak has a large hole to fill in his bucket.
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