As well as handing over more of their hard-earned cash to HMRC, people risk fines and penalties for failing to pay tax they didn’t owe before. Even HMRC is struggling to keep up, as it has to tax more people with no extra resources to do so.
Getting through to its helplines is now an act of endurance, with service so bad that HMRC effectively threw in the towel and declared that it would shut them down for the summer, until forced to backtrack.
People might be more understanding if our public services were getting better, but instead they’re getting worse. Something has to give. Most likely you, to HMRC.
HMRC has just posted its highest takings in a single year, taking in £827billion in 2023/24, up five percent on the year before.
High inflation, rising wages and frozen tax thresholds are driving up the tax take, said Joe Neal, tax manager at Blick Rothenberg. “HMRC produced record takings for income tax, National Insurance (NI), VAT and inheritance tax last year.”
Income tax is rising fastest, with takings up 10 percent in a year, and an incredible 23 percent over two years.
Chancellor Jeremy Hunt’s decision to cut NI twice this year may ease some of the pressure but inflation has pushed up VAT receipts to a record £169billion.
Inheritance tax is also setting unwelcome records, with grieving families handing over £7.5 billion in a year.
The £325,000 nil-rate band has been frozen since April 2009, with the £250 small gift allowance held since 1991 and the £3,000 annual gift exemption since 1981.
With Hunt slashing capital gains tax and dividends allowances for the second time this April, they will also pull in more revenue.
Everywhere we look – and a lot of places we don’t – the Treasury is taking a cut. If you wondered why your car, home, pet insurance and private medical insurance premiums were rising so sharply, higher claims and labour costs are only part of the story.
You also pay insurance premium tax (IPT), at a hefty standard rate of 12 percent. That’s double the six percent charged a decade ago.
The UK may be a nation of animal lovers but even our pets can’t escape the Treasury’s attentions.
IPT rises to 20 percent on travel insurance, electrical appliance and new cars bought from dealerships with insurance part of the package.
An incredible 84 percent of households pay IPT, yet two thirds of us know next to nothing about it, making it easy for Chancellors to hike.
It hits the poorest hardest because they typically spend more on insurance as a proportion of their income.
Tax doesn’t stop. Every time you fill up at the pumps, you hand over more of your money to the Treasury.
Fuel duty is currently levied at a flat rate of 52.95p per litre for both petrol and diesel. Incredibly, VAT of 20 percent is then charged on both the product price and the duty. So you are paying tax on tax.
Right now, tax makes up 62.11 percent of the purchase price of a litre of unleaded, according to the RAC. Motorists also have to pay vehicle exercise duty, too.
If all that wasn’t enough there is stamp duty if we buy a property, duties on alcohol, tobacco and gambling, air passenger duty and of course council tax.
With the nation’s finances under pressure, there is little hope that the tax burden will ease, despite Hunt’s NI cuts. In fact, they are likely to get worse if Labour wins the election, with new taxes on private school fees and pensions likely, and possibly even a wealth tax.
With tax thresholds set to remain frozen until 2028, everybody has to look for ways to reduce their exposure.
With so many taxes out there, we need to keep a close eye on all of them. It isn’t easy, though. If HMRC can’t manage it, how can the rest of us?
