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.
Recent Government policy has been to reduce employee National Insurance Contributions (NICs) rates, freeze the personal allowance and basic rate bands, whilst lowering the point at which higher and additional rates of income tax become payable.
This has led to the increase in income tax receipts which has more than outweighed the comparatively small reduction in NIC receipts.
These changes pose both 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.
Data HMRC has released reveals a contrasting trend – an 11.9 per cent rise in PAYE tax receipts compared to a 1.7 per cent decline in Self-Assessment income tax collections.
This points to the heightened economic strains on sole traders and partnerships, with inflation and higher costs 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.
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 tax receipts 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 for the period April 2023 to February 2024, 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).
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.
