A taxing time

Annual receipts and receipts as a proportion of Gross Domestic Product (GDP)

The chart above shows the cash receipts for individual taxes – Income Tax, Capital Gains Tax and National Insurance contributions, as well as the percentage of GDP that this represents. GDP is the total value of all the income of a country from goods produced and services. In 2023 the GDP of the UK was approximately £2.2 trillion.

Compared to previous years, we see the overall amount of taxes on individuals going up with receipts in the tax year 2023 to 2024 of £446.5 billion (17.1% as a proportion of GDP).

Income Tax has increased to £273 billion in 2023. The last two years have both seen an increase of £30 billion, the highest rises in the last decade. This is split between PAYE Income Tax (£235 billion) and Self-Assessment (£42.6 billion).

The Capital Gains Tax take for 2023/24 was £15.4 billion.

Inheritance Tax annual receipts and receipts as a proportion of GDP

Inheritance Tax (IHT) has surpassed last year’s figure by just over £400 million, increasing to £7.49 billion. Ten years ago, IHT brought in £2.7 billion. From 2021/22 to 2022/23 the total of IHT receipts rose by over £1 billion, which is the largest rise, said to be due to a larger number of deaths taking place during the pandemic.

The tax burden on all of us is steadily going up through the erosion of allowances and reliefs. Whether we see a change of Government or not in the next General Election, there is no expectation this is going to change anytime soon. Planning effectively and using the allowances available over time gives you the best possible chance of success in your financial plan and is imbedded in the service that Old Mill provides.

After the Spring Budget in March, we gave a list of practical tips of how you may be able to reduce your tax bill by using all of the available allowances. You can see that here.