HMRC’s tax revenues for the year ending September 2024 have shown a strong performance, according to leading audit, tax, and business advisory firm, Blick Rothenberg. Tom Goddard, a Senior Associate at the firm, highlighted that HMRC’s total receipts for the year reached over £840.1 billion, up from £814.5 billion in the previous year, marking a 3.15% increase. The rise in income tax receipts, accounting for more than half of the total increase, saw an 8.6% growth, bringing in £22.6 billion more to the Treasury.
This increase in income tax receipts can be attributed to fiscal drag, which is pulling more taxpayers into higher tax brackets due to wage increases and the freezing of personal allowances and tax bands. Tom noted that this fiscal drag is likely to persist until the Government makes adjustments to these bands and allowances, a move that may be on the agenda for Rachel Reeves in the future. While discussions have centered around raising Capital Gains Tax (CGT) and Inheritance Tax (IHT) to address fiscal gaps, the combined receipts from these taxes amount to £14.6 billion and £7.9 billion respectively, impacting only a small percentage of the population.
In contrast, National Insurance Contribution (NIC) receipts totaled £174.8 billion in the past year, with a slight decrease compared to the previous year. Reversing the 2% cut in NIC rates by the Conservatives could potentially generate over £10 billion, based on the Government’s own estimates. However, any move to increase NIC rates would pose a challenge for Labour, as it would contradict their election promises and could lead to negative publicity. The decision to target employer NIC rates as a means of avoiding further tax-related controversies remains to be seen.
Overall, while HMRC’s tax takings have shown resilience, the issue of fiscal drag and the potential strategies to address funding gaps continue to be key considerations for policymakers. As discussions unfold regarding tax policies and revenue sources, finding a balance between increasing tax rates and maintaining public support will be crucial for the Government’s fiscal agenda.
