HMRC nets £35.6bn in tax revenues in biggest jump since the recession

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HMRC’s tax revenue has seen its biggest jump since the recession in the last year, rising by £35.6bn.

The latest tax statistics shows that tax receipts increased by 6.7 per cent in the last year, going from £533.7bn in 2015/16 to £569.3bn in 2016/17, driven by taxes that target ultra high net worth individuals.

But the latest figures do show a significant drop in tax revenue from companies, reflecting the fall in cpropration tax rates, which is down to 19 per cent from 1 April 2017.

Reductions in the main rate of corporation tax have also affected receipts; the rate fell from 26 per cent in 2011-12 to 20 per cent for 2015-16 and 2016-17. Receipts increased between 2015-16 and 2016-17 due in particular to growth in companies’ profits and the introduction of the bank surcharge, according to HMRC. The total corporation tax revenue in 2016/17 was £49.53bn, up from £40.48bn in 2012-13.

Some of the biggest rises in income were seen in taxes targeting the wealthy, including:

· capital gains tax – up 19% in a year from £7.1bn to £8.4bn

· national insurance contributions – up 10% from £113.7bn to £124.9bn

· stamp duty land tax – up 10% from £10.7bn to £11.8bn, driven by an increase in SDLT on homes worth more than £1 million

Receipts are now at a peak of £119.8bn up from £70.2bn in 2009-10. The fall in 2009-10 and then subsequent upturn can be explained by the reduction in the standard rate of VAT to 15 per cent in December 2008 then increasing to 17.5 per cent in January 2010, and to 20 per cent in January 2011. In 2016-17, VAT receipts were equivalent to 6.2% of the OBR’s forecast GDP level.

Andrew Snowdon, partner at UHY Hacker Young, says: ‘The last year has been a bumper one for the taxman, primarily thanks to bringing in more money from wealthier individuals and entrepreneurs.

‘Too high a tax burden on entrepreneurs risks disincentivising them.

‘Income tax receipts rose strongly, but that was driven more by increased tax take from entrepreneurs and the self-employed than from employees.

‘The many tweaks made to national insurance contributions over recent years have resulted in a big jump in income as more people pay higher rates of NICs. Entrepreneurs and other self-employed people that previously opted out of the state pension have been forced to pay NICs under changes introduced last year.