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UK government raises around £800 billion a year in receipts – income from taxes and other sources – equivalent to around 37% of the size of the UK economy, as measured by GDP. The majority are from three main sources: income tax, National Insurance contributions (NICs) and value added tax (VAT). Together these raise over £460 billion.

Tax receipts

Recent trends

Between 2007/08 and 2009/10 receipts fell by around 1% of GDP, following the financial crisis and recession of 2008 and 2009. Receipts have since increased and have exceeded 37% of GDP in four of the past five years. Receipts were last consistently above this level in the mid-1980s.

Receipts from VAT and NICs were larger in 2019/20 and 2020/21, relative to the size of the economy than they were in 1999/00. Income tax and corporation tax receipts were relatively smaller in 2019/20 than they were in 1999/00.

Tax trends

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 duties and tobacco duties have declined.

Coronavirus: impact on 2020/21 receipts

Receipts have been affected by the coronavirus pandemic. In aggregate, receipts have fallen as there has been less economic activity and because the Government has given tax breaks to support the economy. However, the economy shrank to a greater extent than receipts, so receipts became larger relative to the size of the economy in 2020/21.

The financial support that the Government provided to protect household incomes – such as the furlough scheme – and support businesses – such as grants – also supported some tax revenues.

Individual taxpayers: income tax paid, by income

Income tax payments are concentrated amongst those with the largest incomes. The 10% of income taxpayers with the largest incomes contribute over 60% of income tax receipts.

Share of income tax

Households: taxes paid, by income

The Institute for Fiscal Studies (IFS) – an economic think tank – has 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 taxes.

Share of taxes

Impact of taxes across the income distribution

Overall, direct taxes (which include income tax, NICs and council tax) lower income inequality. Richer individuals pay a greater share of their gross household income in direct taxes compared with poorer individuals. Council tax limits the extent to which direct taxes reduce income inequality.

Direct taxes, by income quintile

Measured relative to household income, those with lower incomes pay more in indirect taxes (VAT, duties etc). Measured relative to household spending, there is little variation in indirect taxes across the income distribution.

Indirect taxes as % of income

Indirect taxes as % of spending

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