HMRC income tax receipts rise by £2 billion
HM Revenue & Customs (HMRC) recently reported a £2 billion increase in income tax receipts, reflecting a strong self-assessment period and an evolving dynamic within the tax landscape.
The Government’s recent changes, including adjustments to National Insurance Contributions (NICs), have both mitigated and exacerbated the overall NIC burden.
This is because they encompass rate reductions for certain income brackets, aimed at reducing financial strain and boosting disposable income to stimulate economic activity, and the introduction of higher thresholds for others, which, by freezing or raising these thresholds for higher earners, effectively increases their tax burden.
This development poses challenges and opportunities for taxpayers, highlighting the need for strategic tax planning in response to the increasing tax burden, which is escalating at a rate surpassing inflation.
The data that HMRC has released reveals a contrasting trend – an 11.9 per cent rise in PAYE tax receipts contrasts with a 1.7 per cent decline in Self-Assessment income tax collections.
This trend points to the heightened economic strains on sole traders and partnerships, with inflation eroding small business profitability.
In response, the Government has allocated £200 million towards small business support, aiming to fortify the economic foundation for these entities.
Looking ahead, tax receipts are poised for further growth, propelled by the continuous fiscal drag from frozen income tax thresholds.
These developments signal an escalating tax burden for UK residents, despite the recent cuts to NICs, and emphasise the critical role of informed tax planning.
An examination of other tax receipts
Since April 2023, an examination of the tax receipt composition reveals widespread increases across several categories, culminating in total receipts of £761.1 billion.
This increase spans Income Tax, Capital Gains Tax, National Insurance Contributions, VAT, and other business taxes.
A notable peak in Inheritance Tax collections, which reached £6.8 billion, reflects the Chancellor’s strategic budgetary decisions to maintain current levels of this tax.
For individuals and businesses, understanding the intricate details of the current tax framework is going to be essential for effective financial planning and decision-making this tax year (2024/25).
Adapting to these changes necessitates a focus on tax efficiency strategies and preparation for future tax policy shifts.
Given the complex and changing nature of the tax system, professional tax advice is going to be increasingly important for managing your finances.
Please speak to our team for more information on this issue.
