HMRC collected £95.2 billion in business taxes in the last tax year

This morning’s tax bulletin from HMRC reveals that £95.2 billion was collected in business taxes from April 2023 to March 2024.

HMRC’s full figures for the 2023/24 tax year reveal a taking of £827 billion, their highest in a single year, which is a 5% increase on 2022/23.

The combined effects of inflation and fiscal drag contributed to income tax, CGT and national insurance contributions rising by £23.7 billion during the year to a total of £466.5 billion, a 5.4% rise over the previous year. Income tax receipts jumped 10% year-on-year to reach £273.3 billion in 2023/24.

PAYE income tax receipts grew by 11.4% year-on-year while receipts from income tax collected via self-assessment declined slightly by 1% year-on-year. However, employee NICs fell during the year to £60.9 billion from £65bn last year, a decline of 6%. This reflects the cuts introduced in November 2022, as well the further reduction in January 2024.

“This shows that the increase in income tax takings is due to salaried employees. The average wage increase in the year to January 2024 was 6.1% as employees ask for pay rises to keep up with the rising costs of goods. This, however, can push them into higher tax bands and increase their overall effective rate of tax,” says Joe Neal, Tax Manager at Blick Rothenberg.

The highest increases in percentage terms came from air passenger duty which rose 21% to £3.8 billionn during the year to the end of March. This reflects changes to the APD duty rate structure introduced in April 2023 and the continued bounce back in air travel following the pandemic.

The most significant decline was in stamp taxes which reduced by 22% year-on-year. Stamp Duty Land Tax receipts dropped by 24% to £11.6 billion in 23-24.

“The combined effects of inflation and fiscal drag have played a role in driving up income tax receipts. It’s notable that the rise in receipts has been through PAYE rather than self assessment where receipts actually declined slightly this year, says Paul Falvey, a tax partner from accountancy and business advisory firm BDO.

“This suggests that middle earning employees have borne much of the impact from the freezing of tax thresholds. It may also reflect a small decline^[1] in self employment during the period, possibly stemming from IR35 rules which have encouraged employers to put freelancers onto the payroll.

“The decline in Stamp Duty Land Tax receipts during the year indicates the impact of comparatively high interest rates and the resulting decline in home buying by around 17%. Housing transactions in each quarter of 23-24 were down on the previous year. There are some suggestions of further cuts to Stamp Duty before the general election which will be of particular interest to first time buyers.”

Inheritance tax receipts rose by 5.8% year-on-year to £7.5bn. IHT receipts have risen steadily since 2019-20 when IHT pulled in £5.1 billion.

“HMRC has had another record year. The effects of high inflation and wage growth compounded with frozen tax thresholds are really starting to show. The 2023/24 tax year produced record takings for income tax, national insurance, VAT, corporation tax and inheritance tax,” says Neal.

“The total income tax takings have increased by over 10% in 2023/24 compared to the prior year and are 23% higher than in 2021/22.”

Business taxes and VAT also rose by £10.3 billion and £9.5 billion respectively, with corporation tax receipts rising by 11.6% year-on-year, reflecting the rise in the main rate of corporation tax which increased to 25% on 1 April 2023.

“Business taxes are bringing in a record amount of money for HMRC, with total receipts for the 2023/2024 tax year up £10.3 billion compared to the year before. The Chancellor’s decision to hike Corporation Tax up to 25% will be the main driver behind this surge in extra cash collected,” says Nigel Holmes, Director, R&D at Ryan.

“Higher taxes, alongside stubborn inflation and the UK’s largest minimum wage increase coming into effect this month, will squeeze businesses. With no relief in sight from the government, businesses must look to find savings by claiming all possible tax relief. This can be tricky – it’s easy to overlook the changing thresholds for R&D qualifying expenditure, for example – which is why professional advice is well worth it.”

Neal noted that worryingly, with self-assessment income tax receipts decreasing, “sole traders and partnerships are becoming less profitable”.

“This is likely a result of increased inflation, causing small businesses to have higher direct costs and salary expenses. The government announced £200m of funding to support small businesses in the Spring Budget; Jeremy Hunt will be hoping that this is sufficient to help the heartbeat of the UK economy through this current period,” he said.