This briefing provides an overview of tax statistics, including recent trends, forecasts, and distribution of taxpayers.Jump to full report >>
UK government raises over £750 billion a year in receipts – income from taxes and other sources – equivalent to around 36% of GDP. The majority are from three main sources: income tax, National Insurance contributions (NICs) and value added tax (VAT). Together these three raise over £430 billion. Income tax contributes £180 billion.
Between 2007/08 and 2009/10 receipts fell by around 1% of GDP, largely as a result of the financial crisis and recession of 2008 and 2009. Receipts have increased since and, as a % of GDP, are now larger than at any time since the mid-1980s.
Receipts from VAT and NICs are larger now, relative to the size of the economy now than they were in 1999/00, whereas income tax receipts are smaller.
Since the late 1990s receipts from stamp duty on property transactions, capital gains tax and council tax have all grown noticeably faster than the economy. Fuel duty and tobacco duties have declined, relative to the size of the economy.
The Office for Budget Responsibility (OBR) – the UK’s public finances watchdog – forecasts that government revenues in 2023/24 will be larger than now relative to the size of the economy. Each of the big three taxes – income tax, NICs and VAT – are forecast to increase relative to the size of the economy.
Some taxes – including corporation tax, fuel duties and tobacco duties – are forecast to grow more slowly than the economy, so will be relatively less significant in 2023/24.
Income tax payments are concentrated amongst those with the largest incomes. The 10% of income taxpayers with the largest incomes contribute around 60% of income tax receipts.
The Institute for Fiscal Studies (IFS) – an economic think tank – have analysed how much households pay in tax. Their analysis – which covers around three quarters of tax revenues (including income tax, NICs, VAT, excise duties and council tax) – found that the 50% of households with the largest incomes contribute around 78% of these taxes.
Overall, direct taxes (including income tax, NICs and council tax) lower income inequality. Richer households pay a greater share of their gross income in direct taxes compared with poorer households.
While richer households pay more in indirect taxes than poorer households, they pay less as a proportion of their disposable income.
Commons Briefing papers CBP-8513
Author: Matthew Keep