- We’ve paid £391.6 billion in tax and National Insurance in the tax year so far – from April to August – up £24.9 billion from the same period a year earlier (Source: HMRC tax receipts and National Insurance contributions for the UK – GOV.UK)
- Between April and August, we paid £914 million in capital gains tax (CGT) – down £8 million from the same period a year earlier
- This shows that hikes to CGT rates and cuts to allowances in recent years may have changed the way people interact with their investments and aren’t necessarily a banker for the public finances
- Over the same five-month period, inheritance tax (IHT) receipts were up by £0.1 billion on the previous year to hit £3.8 billion – with more people expected to be dragged into paying IHT
- We also paid £141.9 billion in income tax – up £10.3 billion from the same period a year earlier
Sarah Coles, head of personal finance at AJ Bell, comments:
“The taxman helped himself to an almighty chunk of our income, savings and investments, and cut a multi-million pound slice of estates after people passed away.
“Frozen tax thresholds, hikes to investment taxes, and cuts to allowances mean we’re on track for yet another record tax year. However, capital gains tax bucked the trend, proving that hiking a tax rate doesn’t always mean a bumper cash haul.
Inheritance tax
“Inheritance tax seems set to hit another record, with frozen nil rate bands cutting deeper in the face of rising house prices and investment values. Official figures show that less than 5% of estates pay inheritance tax, but it doesn’t mean everyone else can safely assume they’ll escape this much-hated tax.
“Analysis from Tax Policy Associates indicated that by April 2027, 20% of pensioner households would have an inheritance tax bill if the couple were to die at that point. It means far more of them will need to realistically consider whether they need to take steps to control a potential bill, including making sensible gifts to family during their lifetime.
“Older people will also have one eye on the rule change next April, when unspent defined contribution pensions will be subject to inheritance tax. This is expected to drag another 10,500 estates into the inheritance tax net that year, hike the amount of tax paid by 38,500 estates and increase the tax due by £34,000 each on average. It will make inheritance tax planning even more of a priority.
Capital gains tax
“This is typically a slow month for capital gains tax receipts, but increasingly is a busy one for tax speculation. We paid £198 million in August, up from £190 million a year earlier. However, overall, since April the Treasury has taken less in CGT than a year earlier.
“It’s a useful demonstration of the fact that when it comes to CGT, tightening the screw doesn’t necessarily generate more tax, because people will change their behaviour – they’ll sell up ahead of changes, and then hoard assets for as long as possible afterwards to avoid a hefty tax bill.
“We could still see a surge at the start of 2027, as CGT receipts always spike in the new year, but so far the tax take is lagging. It appears that the dramatic cuts in the annual exempt amount and the hikes in the rate for stocks and shares haven’t bolstered the Treasury coffers significantly. Rumours have resurfaced that the government may be considering equalising CGT rates with income tax rates at the upcoming Budget, but anyone pushing for such a move might want to bear these latest figures in mind.
Income tax
“It’s testament to the powers of a stealth tax that despite ongoing pledges not to hike income tax, we’re seeing record sums syphoned from people’s pockets. And with the freeze in income tax thresholds set to stay in place until 2031, the pain is far from over.
“It’s why it’s never been more important to consider whether there are ways to cut your tax bill. If you risk paying tax on savings interest, it’s worth considering a Cash ISA, where your savings can grow completely free of tax. If you’re worried about tax on your income, especially if a pay rise has pushed you into a higher tax band, extra pension contributions offer tax relief at your highest marginal rate. Plus, if moving tax bands means a higher tax bill on your investments, then a Stocks and Shares ISA is a sensible option, protecting against both dividend tax and capital gains tax.”
