HMRC nets extra £48 billion in tax receipts
The latest figures from HM Revenue and Customs reveal that tax receipts are up nearly ten per cent from 2021 for a total of £553bn.
The report showed that the Treasury had accumulated an extra £48bn from taxpayers in the last nine months of 2022 than in the same period the year before, undoubtedly due to the continued freeze on tax allowances and thresholds.
The largest increase was seen in Capital Gains Tax, National Insurance contributions and income tax which were up by £34bn combined for a total of £281bn over the nine months.
Inheritance tax receipts also experienced a noticeable increase and were up by £700m to £5.3bn. These figures continue an upwards trend month-on-month where independent forecasts expect IHT receipts to reach £7.8bn annually before the freeze ends.
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The freeze on allowances
In his 2021 Spring Budget the then Chancellor, Rishi Sunak, announced a freeze on tax thresholds and allowances for five years, until April 2026. Since then, seeing how lucrative it is, Chancellor Jeremy Hunt has pushed the deadline back a further two years, until April 2028.
It was acknowledged, at the time, that the Chancellor’s clever move would benefit from more taxpayer money without directly putting up tax rates or cutting thresholds. And whilst it may have been hailed a clever move in a politically challenging environment, after a few years of living in the tax threshold and allowance frozen climate we can see that the policy has been even more rewarding for the Treasury than it may have initially been anticipated.
The Government justified this direction by explaining that these kinds of cuts were necessary in order to start paying back the large amounts of debt the Treasury had amassed over the course of the pandemic.
How the freeze affects you
The figures reveal an inescapable fact – as long as the thresholds remains frozen and inflation increases, the threshold will continue to close in on taxpayers. As wages rise slower than inflation, more and more taxpayers will find themselves heading towards higher tax bills even if they do not earn any more than they did before in real terms.
Many are calling these freezes just another example of the Government’s ‘shadow tax’ campaign – a way of gaining more tax revenue without officially raising taxes. The ten per cent increase in tax revenue in just a year demonstrates just how effective this strategy is for the Treasury’s pocket. Only with this method, heavy tax thresholds are no longer only hitting the wealthy – even average earners are beginning to feel the squeeze.
If you’d like to find out more about how we can help you navigate the complexities of the tax system, minimising the tax you pay whilst increasing your wealth, you can book a free non-committal initial consultation . Alternatively, you can give us a call on 0333 323 9065 to get in touch with a member of our team to find out more.
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Please note: The FCA does not regulate estate planning, tax or trust advice. This article is intended as general information and should not be taken as individual financial advice.