Record tax receipts highlight the challenge for tax cuts

In the latest statistics published by HMRC, it is estimated that the tax and NICs revenues received in the period from April 2023 to October 2023 reached a record level of over £441bn. Putting that into context, that is already higher than the total tax revenues received in the entire 2011 financial year, during which the Conservatives first came back into power, and were a little under £420bn.

It has been strongly hinted by both the prime minister and chancellor that there will be good news for individual taxpayers in the Autumn Statement, with rumours that cuts to income tax, NICs, inheritance tax (IHT) and stamp duty land tax (SDLT) have all been under consideration.

Looking at the scale of the increases in revenues of these taxes highlights how far a tax cut may need to go to make a real impact on the increased tax burden on individuals. Taking income tax, NICs, capital gains tax, IHT and SDLT together, they have generated an estimated £259bn in the period from April 2023 through to October 2023.  

By comparison, those same taxes in the same period ending October 2020 generated around £185bn, meaning there has been a 40% increase since then. Given Mr Sunak started as chancellor shortly before then, it’s unlikely to be a statistic he is particularly pleased with. 

That was of course the year in which the pandemic took hold so could reasonably be said to be an unfair comparison given tax receipts were slightly depressed in that period, making for a larger increase. Taking the year before that then, in the period from April 2019 through to October 2019, these taxes generated around £199bn. So there has still been a substantial increase of around £60bn since then in these particular tax receipts.

On average, the receipts from these taxes have increased by £14.9bn a year over the last four years. It would be wrong to suggest that all of this has been paid by individual taxpayers, as companies pay employers’ NICs and SDLT as well, but a significant amount of growth in these tax receipts has been driven by taxes on individuals. 

It is the pace of growth in these tax receipts that is perhaps the most troubling aspect for individual taxpayers. Whilst the Office for National Statistics figures suggest that real average weekly earnings in the UK have increased by around 2% since September 2019, these tax receipts have increased by around 30% over the same period or around 7.5% a year. 

The growth in these tax receipts is rapid compared to earlier years. Looking back to the period from April 2010 to October 2010, these taxes generated approximately £145bn. So there was a smaller increase in the nine years following up to 2019, a little under £55bn, than there has been in the four years since. Whilst the chancellor may highlight the falling inflation figures, it is the inflation of tax receipts and what he proposes to curb their growth that taxpayers may be more concerned by.