Tax

£134bn rise in tax burden in the last year, UHY reports

The increase will also have been accounted for by the economy bouncing back from Covid, as tax receipts reportedly fell by 8% from 2019/20 to 2020/21

Last year saw the biggest increase in UK tax receipts since the millennium, reportedly rising by £134bn (23%) from £584bn in 2020/21 to £718bn in 2021/22, an analysis conducted by UHY Hacker Young reveals.

The accountancy firm went on to say that freezing income tax thresholds and increasing national insurance contributions have “played their part”, as has a steep rise in VAT receipts, partly fuelled by inflation.

The increase will also have been accounted for by the economy bouncing back from Covid, as tax receipts reportedly fell by 8% from 2019/20 to 2020/21. 

In addition, UHY Hacker Young has pointed out that the record receipts may provide the incoming Chancellor of the Exchequer with “wriggle room” to cut taxes. One option, which could help to attract much-needed investment, would be to cancel the planned rise in corporation tax from 19% to 25% from April 2023.

Sean Glancy, partner at UHY Hacker Young, said: “Over the last year, stealth tax rises have swelled the coffers of HMRC. Keeping income tax thresholds frozen has dragged millions more people into higher tax bands, while the increase in national insurance has also boosted revenues.”

Nikhil Oza, corporate tax director at UHY Hacker Young, added: “Businesses would argue that keeping corporation tax at 19% would help maintain and encourage inward investment during a period of high volatility following Brexit, Covid and Russia’s invasion of Ukraine.

“Given the bumper year for revenues we have just seen, the next government may wish to use some of that leeway to keep the UK an attractive place to invest and give businesses – especially SMEs – more scope to invest in boosting UK productivity.”

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