21 February 2024
If you are covering the latest HMRC tax receipts and National Insurance contributions statistics, please see the following comment from Rachael Griffin, tax and financial planning expert at Quilter:
“With the government’s spring budget now just two weeks away, the impact of its current tax policy has been laid bare this morning as new HMRC figures reveal PAYE income tax and NIC1 receipts for April 2023 to January 2024 were £336.2 billion, which is £22.7 billion higher than the same period last year.
“This soaring increase in tax take has persisted despite the fact that these figures include the first month of the government’s 2% cut to National Insurance from 12% to 10% for the main rate of Class 1 employee NICs. Though time will tell whether the cut to NI will cause a slowdown in the rate at which this increase in tax take grows, the fiscal drag effect caused by the frozen income tax thresholds coupled with inflation driven wage growth will likely keep the number ticking up.
“The cut to NI allows basic rate taxpayers to save a maximum of £754 a year. However, this saving is already being eaten into as households face increased costs elsewhere, such as the increase to council tax which will hit from April. The changes mean the average Band D household will now face an annual bill of £2,168, a rise of £103 compared to the current financial year.
“Given the pressures on households, rumours suggest the government is considering a further cut to either income tax or NI during the budget. Polls suggest the Conservatives are struggling, so we can expect they will pull out all the stops at the budget in an attempt to sway voters as we near the election. Should a further cut materialise as part of this, we could see tax revenues fall considerably.
“Inheritance tax had been hitting the headlines as an area for potential change, including suggestions of total abolition, but those rumours have since gone quiet. Given inheritance tax receipts for April 2023 to January 2024 were £6.3 billion, £0.4 billion higher than the same period last year and on track for another record breaking year, the government is likely to leave it well alone. Though higher house prices and frozen thresholds have seen more people caught by the IHT net in recent years, ultimately, it impacts relatively few families but brings in a tidy sum to boost government coffers which it will be unwilling to relinquish – particularly if other tax cuts are on the table.”
