Opinion
George Bull 23 Feb 2017 12:47pm

Hammond's Budget tax bonus?

Will January’s record tax take give the chancellor extra room for manoeuvre, asks George Bull

The all-important January tax figures, published this week, reveal that at £73bn, total tax collected by HMRC was up 14.1% on the same period last year. A big contributor to this rise was from those filing self-assessment tax returns who paid over a whopping £13.7bn in income tax in January, the highest January figure on record, and 9.7% higher than the same period last year.

These numbers reflect the growing army of people who are self-employed for tax purposes as well as the buoyancy of the economy during the last tax year.

As a result of this healthy tax take, public sector net borrowing was in surplus by £9.4bn in January 2017, the highest January surplus since 2000. It would be tempting to think that these robust figures might give chancellor of the exchequer Philip Hammond some room to manoeuvre in his March 8th Budget, particularly in respect of both NHS finances and business rates where he is under considerable pressure.

However, as the experience of the chancellor's predecessor George Osborne reminds us, a lot can happen between the publication of the January tax figures and the March Budget statement.

Many had feared that the rise in self-employment would be accompanied by a reduction in PAYE receipts. With PAYE income tax receipts up by 4.8% over the year, those fears have proved groundless. Similarly, January National Insurance Contributions are up by 11.4% on 2016.

Other taxes have increased too. For example, capital gains tax is up by 14%, inheritance tax by 22.5% and stamp duty land tax by 16.3%. Some of these increases may be explained by private landlords changing their arrangements in anticipation of the new tax regime which will apply to them.

The 6.3% increase in VAT reinforces the idea that the retail economy is basically in good shape, while the 26.2% increase in corporation tax – the largest increase of any single tax – may reflect not only buoyancy in the economy but also that most tax-allowable losses brought forward by companies from earlier, difficult years have now been used up.
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