Business surgery with Keith Senior: Just how much money do you pay to government?
In January, HMRC released its annual figures for the amount of government revenue in the fiscal year 2023/24. They show that a total of £830 billion was collected in taxes, plus a further £100 billion in ‘other revenues’, such as interest on government assets including student loans and income from public housing.
Interestingly, the three main sources of tax revenues are income tax, National Insurance and VAT, together accounting for 63% of all tax. Company tax is a further 11%. Looking at Capital Gains Tax (CGT) and Inheritance Tax (IHT), those together amount to less than 4% and a total of £42 billion.
As a proportion of GDP, total taxes stand at 30.2%. Similar to the last 2 years but higher than the average over the last 20 years (28%). That’s likely what drives a general feeling that we are worse off now compared to past years. Especially when the main transaction tax (VAT) - which fluctuates with spending - remains at around 6% of GDP after adjusting for the effects of the Covid lockdowns, and despite higher inflation over the previous year.
And yet in the Autumn Budget, much focus was on changes to CGT and IHT. The government has created fury over such changes, despite them likely having little impact on the overall tax take. And there’s a Spring Forecast due on 26 March!
When we look at HMRC’s focus on gathering the cash in future years, there has been further investment from the current government in HMRC staff, with plans for an additional 5,000 staff to deal with checking taxpayer compliance and 1,800 more in debt management to chase non-payers. This indicates a more aggressive stance, more enquiries and an intention to achieve higher levels of penalties and interest in settlement of tax due. Enquiries are already a major feature of today’s tax landscape, and protection against them is important. Every business owner and individual should take very seriously their obligations in reporting their taxes correctly and fully.
One of the moves in recent years has been the use of digital technology to help make recording transactions as accurate as possible at the start. Enhancing quality and reliability, setting controls over reporting income and facilitating getting the tax calculations correct first time. This is also a move that has been growing in Europe, so any business exporting will also benefit with this approach.
Nobody likes paying more tax than they should, but it’s equally important to know what you face, so that’s why we encourage early attention to tax reporting obligations and using software that allows you to get best information to help you forecast potential liabilities. Better information allows you to make better decisions about your business’ future growth. If you would like help or to discuss how you can improve your systems, please give me or one of the team a call on 01284 704260.
Keith Senior, Consultant, Jacobs Allen, now part of Scrutton Bland
