RSM UK's George Bull considers HMRC's tax collection data.
HMRC’s latest tax collection data show that 2018/19 was a bumper year for the nation’s biggest tax collector with receipts reaching a record £622bn, that’s £28.9bn up on the previous year. In part that reflects the state of the economy, but it’s noticeable that tax continues to creep up as a percentage of GDP.
Taken together, income tax, NICs, bank payroll tax and capital gains tax make up 54 per cent of taxes collected by HMRC. Month by month throughout the tax year, PAYE delivered its highest-ever flow of cash receipts, boosted in July and January by self-assessed income tax and capital gains tax. The total for the year is 5.8 per cent up on 2017/18. A run of 12 best-ever months is something most businesses can only dream about!
VAT accounts for 21 per cent of taxes collected by HMRC, its second-biggest source of revenues. Here, the out-turn is almost as good (in HMRC’s eyes!) with a 5 per cent year-on-year increase. Almost £14bn VAT was collected in July 2018, the largest monthly figure ever. However, VAT payments have a strong cyclical pattern with only half that amount collected in June 2018. HMRC might privately dream of a future in which MTD smooths the monthly level of VAT receipts, but there’s no sign of that happening in the foreseeable future!
Corporation tax and related levies managed a relatively modest increase of 4.3 per cent, a record. If the relatively new diverted profits tax assists HMRC’s challenges to US multinational corporations, thought by some to be underpaying tax to the tune of £4.6bn, then 2019/20 could be another bumper year for the corporate taxes.
Stamp duty land tax and the other stamp taxes always attract attention. SDLT breaks the winning streak of the other taxes, with a 5.3 per cent drop over the year. The three likely reasons for this are:
- seasonal fluctuations in the property market, as well as wider fluctuations across England;
- the devolution of SDLT payments in Wales (the impact of devolving taxes is often overlooked); and
- the introduction of first-time buyers’ relief which started in November 2017.
These are a microcosm of the three factors to which all UK taxes are susceptible: economic performance, tax reliefs and devolution. Following devolution, other tax collectors in the UK include Revenue Scotland and the Welsh Revenue Authority. Their tax data is not included in HMRC’s statistics.
This brings us to fuel duty, tobacco duty and alcohol duty – the ‘sin taxes’. While these are declining as a percentage of GDP, cash receipts continue to rise. In the case of fuel duty, which is particularly topical following the recent climate change protests, the downward trend against GDP is almost certainly a result of the continuing freeze in the fuel-duty escalator. Whether that freeze will survive the next Budget remains to be seen. And while receipts from air passenger duty continue to increase, environmental taxes – both cash receipts and as a percentage of GDP – are falling. With environmental tax receipts totalling less than £3bn of the £622bn collected by HMRC, it’s difficult to escape two conclusions:
- environmental taxes attract far more criticism than their relatively low level deserves; and
- the reality of the UK’s environmental tax policies seems completely at odds with the country’s commitments under the Paris Climate Agreement.