New analysis has revealed how the pandemic influenced tax growth across the UK, as HMRC received more from Alcohol and Tobacco duties during the 2020/21 tax year than they did for stamp duty.
RIFT Tax Refunds’ data on the total receipts received by HMRC during the first full pandemic tax year of 2020 to 2021 showed a 7.7 per cent annual drop in tax paid compared to the previous year.
The annual total of £584.5m was the lowest seen since the 2015/16 tax year, although it remained some 29 per cent higher than a decade earlier.
Income Tax accounted for 33.1 per cent of these total receipts, up 0.3 per cent annually, with the amount paid from those in full-time employment increasing 1.2 per cent year on year, while Self-Assessment receipts fell by 2.6 per cent annually.
National Insurance accounted for a quarter of all receipts received by HMRC, with VAT (17.4 per cent) and Corporation Tax (8.7 per cent) also accounting for a large proportion of tax paid. Although the latter did see annual declines of 21.7 per and 17.3 per cent 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 what was an extremely uncertain time, as well as the drop in earnings suffered by many. But how else has the pandemic shaped the tax landscape?
Further pandemic influence
The influence of the pandemic is also clear across a number of other areas. With widespread travel bans only easing in recent months, it’s no surprise that HMRC saw a 83.9 per cent annual decline in receipts received via Air Passenger Duty, falling to a total of just £585m in 2020/21.
Chief exec of RIFT Tax Refunds, Bradley Post, commented: “The notable decline in tax paid for Air Passenger Duties demonstrates the torrid time that was 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.”
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 when compared to the previous year, accounting for just 1.5 per cent of total receipts received by HMRC, although the overall total still sat at £8.7m.
In fact, despite a pandemic property market boom pushing house prices up by over ten per cent, Alcohol and Tobacco Duties both accounted for a higher proportion of total tax paid compared to Stamp Duty, and also saw a year on year uplift of 2.3 per cent and 13.2 per cent respectively. During 2020/21, the UK paid £12.1m in Alcohol Duty and almost £10m in Tobacco Duty.