Tax take rises as nation weans itself off lockdown and Government support

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In the past three months the Government has borrowed more than double its entire borrowing for last year, with June marking the third highest month on record for borrowing. The cost of supporting the economy and businesses through the Covid-19 crisis in June came in at £35.5bn, five times the level seen last June.

However, at least the amount of money the Government is taking in in tax is edging higher as lockdown eases and more businesses return to work and wean themselves off Government support schemes. The total amount the Government took in tax in June rose by around 40% compared to May as people returned to work and income tax and national insurance payments increased.

While the total tax take by the Government is still 14% lower than the same month last year that’s a dramatic improvement on April’s figures – when we were in the full grip of lockdown – which were more than 40% lower than the same month a year earlier. The picture over the past three months of lockdown is less rosy, with Government tax receipts a third lower than they were in the same three months last year – representing a £51bn hole in the Government’s accounts.

In particular, stamp duty payments rose by almost 60% in June compared to last month as the housing market got moving again and some pent-up demand from lockdown was seen. That said, the tax take is still a third below where it was in June last year, so claims of a rampant rebound in the property market are wide of the mark. These figures will also now fall, after the Government’s announcement of a stamp duty break for many homebuyers, leaving a further cost for the Government to meet.

The nation’s return to the pub has helped to boost the public coffers, with the amount taken in beer duties rising 320% compared to May and is almost 40% higher than in June last year. The re-opening of the travel industry has also given a slight lift to the tax figures, with tax receipts rising from £7m in May to £60m in June. But this is still more than 80% lower than the same month last year as our summer holiday season struggles to get going.

Tax type Jun-19 Jun-20 Percentage change
Total HMRC receipts 41,730 35,753 (14%)
Total Income Tax 13,036 12,837 (2%)
Of which: PAYE Income Tax 13,106 13,379 2%
Of which: SA Income Tax 160 107 (33%)
Capital Gains Tax 5 21 353%
Apprenticeship Levy 230 247 7%
NICs 11,040 11,109 1%
VAT 8,118 1,104 (86%)
Total Corporation Tax 2,808 4,744 69%
IHT  357 508 42%
Shares 227 257 13%
Stamp Duty Land Tax 831 573 (31%)
Annual Tax on Enveloped Dwellings 3 5 51%
Tobacco duties 767 541 (30%)
Spirits duties 326 331 2%
Beer duties 340 469 38%
Wines duties 370 467 26%
Cider duties 26 17 (34%)
Betting & Gaming 88 150 72%
Air Passenger Duty 331 60 (82%)
Insurance Premium Tax 20 135 567%
Landfill Tax  38 9 (77%)
Climate Change Levy  28 41 43%
Aggregates Levy 17 15 (11%)
Soft Drinks Industry Levy 0 45 35081%
Customs Duties 270 193 (29%)
Penalties  59 47 (20%)
       
Government spending      
Child and Working Tax Credits 1,523 1,355 (11%)
Child Benefit Payments 958 944 (1%)
Tax-Free Child Care 15 11 (24%)
Coronavirus Job Retention Scheme NA 9,037 NA
Self-Employment Income Support Scheme NA 570 NA

Source: HMRC

*https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/902339/Public_sector_finances_June_2020_HMT.pdf

These articles are for information purposes only and are not a personal recommendation or advice.


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Written by:
Laura Suter

Laura Suter is Personal Finance Analyst at AJ Bell. She is a multi-award winning former financial journalist, having specialised in investments. Laura joined AJ Bell from the Daily Telegraph, where she was investment editor. She has previously worked for adviser publications Money Marketing and Money Management, and has worked for an investment publication in New York. She has a degree in Journalism Studies from University of Sheffield.