Tax revenue sources in UK

Readers Question: Where does the UK government get its money from?

UK tax revenues come from a variety of sources. The main sources of tax revenue include:

  1. Income tax (main tax rate is 20%)
  2. National Insurance
  3. VAT (20% most goods and services)
  4. Corporation tax (main rate 21%)
  5. Council Tax (local government)
  6. Business rates
  7. Excise duties (alcohol, cigarettes)
  8. Other taxes include (stamp duty, carbon tax, airport tax, inheritance tax, capital gains)

Most tax is collected by HM Revenue and Custom.

They are responsible for income tax, excise duties, VAT and NI. Tax revenue at HM Treasury

However, the central government also get revenue from other sources. Public sector finances at ONS (less detailed)

Tax revenue sources 2013/14

Type of tax Revenue £ million
Income Tax 156,898
NICs 107,690
VAT 104,718
Corporation  Tax 39,274
Fuel duties 26,881
Alcohol taxes 19,986
Stamp Duty Land 9,273
Capital Gains 3,908
Inheritance tax 3,402
Shares 3,108
Insurance premium tax 3,014
Air passenger duty 3,013
Betting + gaming 2,098
Landfill Tax 1,189
Petroleum Revenue tax 1,118
Climate Change levy 1,068
Tax Credits -2,743
Total HMRC receipts 489,850
other Gov’t revenue (interest, asset purchase) 101,000
Total Central gov’t revenue (ANBV) £590,544Public sector finances at ONS (less detailed)

 

Pie chart of tax revenue

 

Tax revenue

 

 Sources:

 

List of Tax Receipts by Type of Tax

OBR forecast. OBR

Source of Tax

 

How Much Income Tax do People Pay?

UK Income tax is based on marginal tax rates. See: marginal tax rates.

The table below is a useful guide to how much income tax you actually pay. It shows that income tax in the UK is progressive. (those on higher incomes pay bigger % of gaxe

income tax paid

 

Changes in tax revenue 1997 – 2014

uk-tax-revenue-97-14

Tax and Inequality

The UK tax system plays a role in redistributing income.

tax benefits

  • The poorest 10% pay £4,000 in tax (mostly indirect, VAT, excise duty). But, receive over £5,000 in tax credits and benefits.
  • The richest 10% pay over £30,000 in tax (mostly direct, income tax). They receive around £2,000 in benefits.
  • Overall, the average household pays £12,000 in tax and receives £5,000 in benefits.
  • However inequality in the UK has increased since 1980. See: Inequality in UK

Tax receipts and government spending

In a recession, tax receipts tend to fall significantly as the government receive lower income tax and lower corporation tax.

tax revenues

Source of Graphs: UK Budget 2011 HM Treasury

Related

2 thoughts on “Tax revenue sources in UK

Comments are closed.