UK financial services contributed a record amount of £75.5bn in tax in the year ended 31 March 2019, according to a new report commissioned by PwC.
The total contribution comprised £33.4bn taxes borne and £42.1bn taxes collected, with the level remaining “broadly stable” alongside 2018’s contribution of £75bn. The figure represents 10.5% of all UK tax receipts in the period.
The ‘Total Tax Contribution of UK Financial Services’ report found that the largest share of the sector’s contribution came from employment tax. Financial services employ some 1.1 million people, generating 7.1% of GVA and 11.6% of all UK employment taxes.
The report also found that tax profiles differed by financial services sub-sector. Corporation tax made up 34% of contribution from challenger banks, for example, compared with 15% across the banking sector as a whole.
Employment tax contribution from challenger banks was 37%, however, which was lower than the banking sector average of 50%.
Tax receipts from banks were found to be more dependent on the location of operations and employees, whereas insurers generated a higher proportion of taxes based on the location of their customers.
Catherine McGuinness, policy chair at the City of London Corporation, said: “Despite a challenging economic climate and uncertainty around Brexit, the sector has maintained its tax contributions from the record high of last year.
“It is only right that the City continues to make a fair contribution to support the wider economy and public services.”
She added: “With Brexit looming, however, the UK must remain competitive to safeguard the sector’s employment base and significant tax contribution. The sector is vital to supporting prosperity right across the country.
“Besides 1.1 million directly employed, it provides services such as bank accounts, mortgages and business loans on which millions more depend upon in their daily lives. It will play a critical role in fuelling our economic success after we leave the European Union.”
Andrew Kail, head of financial services at PwC, said: “New ways of working, operational business models, and technological disruption have the potential to change the employment profile – and therefore the tax profile – of firms across the sector.
“It’s important that we look closely at our tax system to ensure it’s fit for new ways of working and doing business while optimising the competitiveness of the sector post-Brexit.”