The House of Commons Library has published 'Tax Statistics: an overview' using research from several resources. The report shows that for 2022/23 UK government revenues were £1,027 billion, equivalent to 40% of GDP, with Income Tax, National Insurance Contributions (NICs) and Value Added Tax (VAT) contributing around three-fifths of all revenues.
Apart from taxes and duties, the government also receives other receipts, largely from income generated by public corporations, such as through social housing, and from interest payments on its assets, such as Student loans.
Income tax receipts
- 9.1% of GDP in 1999/00.
- Prior to the financial crisis and recession of 2008 and 2009, Income Tax receipts had risen to 10.0% of GDP.
- In 2019/20, Income Tax receipts were equivalent to 8.6% of GDP.
- Receipts increased to 9.8% of GDP in 2022/23.
National Insurance Contributions (NICs)
- NICs receipts were 5.4% of GDP in 1999/00.
- NICs receipts were 6.4% in 2019/20. NICs receipts rose, relative to the size of the economy, during the COVID pandemic.
- NICs receipts were equivalent to 7.0% of GDP in 2022/23.
Corporation tax
- Corporation tax receipts grew to 2.6% of GDP in 2020/21. They benefited from the grants and business rates relief provided to businesses in 2020/21, which supported their taxable profits.
- Receipts were equivalent to 3.1% of GDP in 2022/23.
Notes: Capital taxes include stamp duties, capital gains tax and inheritance tax. Corporation tax here includes £4 billion from the energy profits levy (EPL).
Who pays Income Tax?
- Estimates for 2020/21 suggest that the top 1% of income taxpayers (those with the largest incomes) received around 13% of all income and contributed 29% of Income Tax receipts.
- The top 1% are estimated to have pre-tax incomes of over £183,000.40.
- The top 10% of income taxpayers (including the top 1%) are expected to contribute around 60% of Income Tax receipts.
- The bottom 50% of income taxpayers (with incomes under £26,300) are expected to contribute around 10% of Income Tax receipts.
Household taxes
The Office for National Statistics (ONS) looked at the effects of taxes and benefits on UK household income. Its analysis considers the impact of direct and indirect taxes.
Direct tax
In 2021/22, the average household paid £15,200 in direct taxes, equivalent to 24% of gross income (gross income also includes benefits provided by government).
Both the ONS and the Institute for Fiscal Studies (IFS) conclude that, in aggregate, direct taxes (which include, Income Tax, employee NICs and council tax) reduce income inequality. Household incomes are more evenly distributed across the income distribution after direct taxes have been paid.
- The richest fifth paid on average £44,300 in direct taxes in 2021/22, which is equivalent to 31% of gross household income.
- The poorest fifth paid £2,800 in direct taxes, which is equivalent to 14% of gross household income.
Indirect taxes
When measured relative to household incomes, indirect taxes (around 48% of which are VAT) can be judged to be regressive. Those with lower incomes pay more relative to their income as when measured relative to household expenditure, indirect taxes are more evenly distributed across individuals.
- The richest one-fifth paid £9,000 in indirect taxes in 2021/22.
- For the richest fifth it is equivalent to 9% of disposable household income.
- The poorest fifth paid £4,800 in indirect taxes in 2021/22..
- For the poorest fifth this is equivalent to 28% of disposable household income.
Effects of Coronavirus
Unsurprisingly, COVID-19 had a significant impact on taxes. In 2020-21, UK government revenues were £795 billion, 4.0% lower than in 2019/20. Paradoxically, revenues fell slower than the economy which meant that they became larger relative to the size of the economy in 2020/21, compared with 2019/20 in part due to the financial support that government provided to protect household incomes and support businesses.
In cash terms, the hardest hit taxes in 2020/21 were:
- VAT, where receipts were over £17 billion lower, compared with 2019/20 or equivalent to 6.0% of GDP in 2019/20 and 5.6% in 2020/21.
- Consumers were less able to go out and spend during the pandemic.
- Government policies, such as cutting VAT from 20% to 5% for the ‘hospitality, accommodation and attractions’ sector, also affected VAT receipts.
- Business rates revenues decreased primarily because of the business rates holidays for the retail, hospitality and leisure sectors.
- Air passenger duty, Stamp duty on property and fuel duty all decreased relative to the size of the economy.
Tax revenues grew strongly in 2021/22, increasing by 16% compared with 2020/21, which had been disrupted more by the pandemic.
Useful guides on this topic
Calculating Corporation Tax & Checklist
How do you calculate Corporation Tax? What is the small profits rate? How do you calculate Marginal Tax relief? How do you adjust for Associated Companies? What is meant by Control? What are Augmented profits?
Sole trader v. limited company: Tax differences & savings (2023/24)
Is it better from both a tax and legal point of view to run your business as a sole trader or as a company? Are there tax advantages in running a business as a company? What legal protections apply?
National Insurance: What's the maximum payable?
How are National Insurance Contributions (NICs) limited? What is the maximum payable? What different rules apply to employment and self-employment income?
Starting in business: VAT
One of the first decisions to make when starting in business is whether or not you should register for VAT. Am I running a business for VAT purposes and if so, when do I register?
Calendar of tax deadlines and new tax measures
When do common recurring tax deadlines fall? What other tax significant events are upcoming? What do I need to remember this month?
Tax Data Card 2023-24
A summary of key tax rates and allowances for 2023-24 and 2022-23.
External links
House of Commons Library. Tax statistics: an overview
