HMRC collected £392.5bn in tax and NICs during the period from April to September 2023, according to its October 2023 statistics release, some £23.1bn higher than for the same period in 2022. Cash receipts from income tax, CGT and NICs rose by £11.5bn, with the tax take from business taxes up by £7.7bn and VAT by £6.8bn, although receipts from stamp taxes were £3bn down.
With much of the increase attributed to income tax, Neela Chauhan, tax partner at UHY Hacker Young notes that the frozen basic rate band has pushed many more taxpayers into the higher rate bracket: ‘Expanding the top-rate taxpayer pool is clearly having an impact. The government has been looking for a way to raise revenue and they have found it. The latest income tax figures will be feeding calls for concessions. If not outright tax cuts, then at least raising the point at which the higher rates of income tax come into effect with inflation.’
Tim Walford Fitzgerald, private client partner at HW Fisher, highlights a dilemma for the chancellor: ‘The chancellor has fiscal drag to thank for some of this extra money going into the Treasury’s pocket. Fiscal drag is a term that describes the increase in the tax burden that is caused by incomes and asset values rising faster than tax thresholds. It’s a convenient way for the government to avoid raising the headline rate of tax, but to still reap the cash benefits as people are forced to pay higher rates of tax as their incomes rise.
‘The decision to freeze the income tax personal allowance and the higher rate threshold – rather than increasing them in line with inflation – is causing a significant amount of fiscal drag in the UK, especially with wage inflation hitting 7.8%. Despite this, government debt remains close to the value of the UK’s national economy, so it’s no wonder that the government isn’t planning any tax cuts at the upcoming Autumn Statement’.
HMRC collected £392.5bn in tax and NICs during the period from April to September 2023, according to its October 2023 statistics release, some £23.1bn higher than for the same period in 2022. Cash receipts from income tax, CGT and NICs rose by £11.5bn, with the tax take from business taxes up by £7.7bn and VAT by £6.8bn, although receipts from stamp taxes were £3bn down.
With much of the increase attributed to income tax, Neela Chauhan, tax partner at UHY Hacker Young notes that the frozen basic rate band has pushed many more taxpayers into the higher rate bracket: ‘Expanding the top-rate taxpayer pool is clearly having an impact. The government has been looking for a way to raise revenue and they have found it. The latest income tax figures will be feeding calls for concessions. If not outright tax cuts, then at least raising the point at which the higher rates of income tax come into effect with inflation.’
Tim Walford Fitzgerald, private client partner at HW Fisher, highlights a dilemma for the chancellor: ‘The chancellor has fiscal drag to thank for some of this extra money going into the Treasury’s pocket. Fiscal drag is a term that describes the increase in the tax burden that is caused by incomes and asset values rising faster than tax thresholds. It’s a convenient way for the government to avoid raising the headline rate of tax, but to still reap the cash benefits as people are forced to pay higher rates of tax as their incomes rise.
‘The decision to freeze the income tax personal allowance and the higher rate threshold – rather than increasing them in line with inflation – is causing a significant amount of fiscal drag in the UK, especially with wage inflation hitting 7.8%. Despite this, government debt remains close to the value of the UK’s national economy, so it’s no wonder that the government isn’t planning any tax cuts at the upcoming Autumn Statement’.
