HMRC’s receipts for the year to September 2024 show a healthy tax take, but more taxpayers are being pulled into higher tax rates by fiscal drag, say leading audit, tax and business advisory firm, Blick Rothenberg.

Tom Goddard, Senior Associate at the firm, said: “Statistics released today show the total HMRC receipts for the year to September 2024 are up to over £840.1bn from £814.5bn collected in the year to September 2023, a 3.15% increase over the period. Income tax receipts account for more than half of this increase, with the annual receipts up 8.6% in the last 12 months, equating to £22.6bn more in the Treasury’s coffers.”

He added: “The main cause of the income tax increase is fiscal drag which continues to bring more people into higher rates of tax. This has been created by wage rises over the past 12 months and the freezing of the personal allowances and tax bands.”

Tom said: “This fiscal drag will continue until the Government moves these bands and the personal allowance, which is something that Rachel Reeves will keep up her sleeves for a later date. For the moment she continues to talk about the £40bn of funding needed to fill the ‘black hole’.”
He added: “There has been a lot of talk about increasing Capital Gains tax (CGT) and Inheritance Tax (IHT) as a way of plugging that hole, but these receipts for the last year are only £14.6bn and £7.9bn respectively.”

Tom said: “For the majority of taxpayers, these taxes are unlikely to ever affect them. Those who pay IHT only account for only 4% of the population. The total tax take of both IHT and CGT is less than the increase in income tax receipts over the last year. Increasing the rates of tax on either of these taxes is not going to make a huge contribution.”

He added: “If you compare this to the National Insurance Contribution (NIC) receipts which are £174.8bn for the last 12 months, itself down £2.8bn compared to the prior year’s take, reversing the Conservatives 2% cut to the main rates of NIC could bring in over £10bn according to the Governments own calculations.”

Tom said: “However, breaking their election pledges not to increase NIC rates would create another publicity headache for Labour. We shall have to wait and see whether Reeves decides to specifically target employer NIC rates as a way of sparing her party from another tax related PR disaster.”