Analysis by tax refund experts, RIFT Tax Refunds, has revealed how the pandemic has influenced tax growth across the UK. HMRC received more alcohol and tobacco duties during the 2020–2021 tax year than they did for stamp duty.
RIFT tax refunds analysed data on the total receipts received by HMRC during the first full pandemic tax year of 2020–2021, which shows a -7.7% annual drop in tax paid compared to the previous year. The yearly total of £584.5m was the lowest seen since the 2015–2016 tax year, although it remained some 29% higher than a decade earlier.
Income tax accounted for 33.1% of these total receipts, up 0.3% annually, with the amount paid from those in full-time employment increasing 1.2% year on year. In comparison, self-assessment receipts fell by -2.6% annually.
National Insurance accounted for a quarter of all receipts received by HMRC, with VAT (17.4%) and corporation tax (8.7%) also accounting for a large proportion of tax paid. Although the latter did see annual declines of -21.7% and -17.3%, respectively.
These annual declines in self-assessment, VAT and corporation tax are no doubt due to a combination of government measures to help businesses survive an incredibly uncertain time, as well as the drop in earnings suffered by many was. But how else has the pandemic shaped the tax landscape?
Further pandemic influence
The influence of the pandemic is also evident across several other areas. With widespread travel bans only easing in recent months, it’s no surprise that HMRC saw a -83.9% annual decline in receipts received via air passenger duty, falling to a total of just £585m in 2020–2021.
The choice to suspend stamp duty land tax on property purchases from July 2020 saw the level of stamp duty tax paid drop by a quarter compared to the previous year, accounting for just 1.5% of total receipts received by HMRC. However, the overall total still sat at £8.7m.
In fact, despite a pandemic property market boom pushing house prices up by 10.8%, alcohol and tobacco duties both accounted for a higher proportion of total tax paid compared to Stamp duty. Also, they saw a year on year uplift of +2.3% and +13.2%, respectively. During 2020–2021, we paid £12.1m in Alcohol Duty and almost £10m in Tobacco Duty.
A 13.3% annual increase in tax receipts received from Capital Gains Tax. In comparison, another unfortunate consequence of Covid has also been a 4% yearly jump in inheritance tax receipts received – with the total paid to reach over £5.3m.
One silver lining was the empathetic approach HMRC took during this challenging time, with receipts resulting from Penalties falling -30.6% on the previous year, although they still dished out £445m worth of penalties.
CEO of RIFT Tax Refunds, Bradley Post, commented: ‘We can fully appreciate that not everyone finds the subject of tax fascinating and for many, it can be a cause of stress and confusion, particularly those required to complete a Self-Assessment.’
‘However, when analysing the tax we pay as a nation, it can provide some fascinating insight regarding economic health and how we’re living and our lifestyle trends. The notable decline in tax paid for air passenger duties demonstrates the torrid time endured by the travel sector as a result of travel restrictions, while the impact of the stamp duty holiday is also clear with receipts falling by a quarter.’
Data sourced from HMRC – HMRC tax receipts and National Insurance contributions for the UK.