Income tax receipts at all-time high

News of record-busting tax receipts from HMRC is likely to represent a double-edged sword to the chancellor, as he tries to resist calls to loosen the purse strings amid demands for tax cuts.

HMRC has published its latest monthly revenue statistics showing how much tax has been received in the financial year up to January 2023. These are anticipated to be the last monthly statistics of this nature to be published prior to the Spring Budget announcement on 15 March 2023.

At any other time, the news would be welcomed by the Treasury as income tax receipts are at a record high for the period from April 2022 to January 2023, with income tax receipts exceeding £206bn.

Based on the current trend of receipts, income tax receipts for the full financial year to 31 March 2023 could be a quarter of a trillion pounds. This will be the first time in history that annual income tax revenues will have reached this level.

The latest data from the Office of National Statistics estimates that in 2021 there were 28.1 million households in the UK. Income tax receipts for the full financial year of £250bn would mean an average income tax bill per household of £8,898 per household. That figure for the year before was £7,851 so it is predicted that on average, households will be over £1,000 worse off from income tax alone this financial year.

A significant amount of the increase in income tax revenues this year has been driven by those within self-assessment and increased income tax bills that have been paid in January 2023.  

The amount of income tax paid by those in self-assessment in the period from April 2022 to January 2023 was £38.6bn, compared to £32.6bn for the same period a year before. That represents an 18.4% increase. The income tax revenues from self-assessment in the ten months in the financial year to date are higher than the full year self-assessment income tax receipts in every year since 2000 when records began.

With an estimated 12.2m taxpayers in self-assessment, they have on average paid income tax of £3,165 in the period from April 2022 to January 2023, compared to £2,672 for the same period the year before.

The big spike in income tax receipts again highlights the true cost of fiscal drag on individuals over the last year. However, those hoping for a Spring clean of the tax-raising measures announced last year are likely to be sorely disappointed. The chancellor’s main focus is likely to be on reducing inflation and any substantial tax giveaways are likely to be delayed until the Autumn Statement later this year at the very earliest.