Overall, HM Revenue and Customs (HMRC) receipts totalled £669 billion which compares favourably to the prior year amount of £564 billion, an increase of 18%. This jump in revenue has helped to claw back the significant hit taken due to the pandemic, when total HMRC receipts tumbled between yearend Aug 19 and Aug 20 by over £66 billion or 11%. The bounce back represents around 57% of the “lost” revenue HMRC would have expected last year.
The increased tax revenue will be from a combination of the deferral reliefs for VAT and income tax ending, as well as greater economic activity since lockdowns have all but ended. These are promising signs for the Treasury and Rishi Sunak in particular, who will be under immense pressure in the run up to the Budget next week to increase tax receipts without angering the typical conservative voter base, as well as the new voters in ‘red wall’ constituencies.
The tax statistics show significant increases in both PAYE (13%) and NIC (8%) receipts compared to August 2019. Whilst these increases on the one hand can be said to showcase the underlying strength of the UK economy and the labour shortages we are currently experiencing with a consequent increase in wages for many people, they would also appear to be an earlier indicator of the underlying inflation risks in the UK economy.
There also appears to be a real risk that higher wages will simply result in more money ‘chasing’ the limited amount of goods and services which are presently available, which will realistically have an inevitable impact on high street prices in due course.
Whilst these are positive movements in tax receipts, there remains a huge debt mountain to begin chipping away at. The overall tax take returning to a normal amount is only the first step in what will be a long recovery for the country’s finances, and which may need further (and unpopular) tax raising measures to succeed.
Would you like to know more?
If you would like to discuss the above or how it may affect you and your business, please get in touch with your usual Blick Rothenberg contact or Robert Pullen, using the details on this page.
For press enquiries, please contact David Barzilay using the details on this page.