Highest ever tax take at £939bn in single year

As the total tax take heads inexorably towards the ominous one trillion pound figure under chancellor Rachel Reeves, the latest figures show HMRC collected £938.8bn in taxes in 2025-26, a huge increase of 9.3% from £858.6bn the previous tax year. In the past two years, the figure is up £110.2bn from £828.5bn in 2023-24, a significant 13.3% hike in revenues pouring into the Treasury.

To put this in context annual tax take over the last 20 years has grown from £428.6bn in 2006-07 during austerity to today’s £938.8bn, and it is 30.7%, up a full two percentage points as a proportion of GDP over that time.

VAT

VAT was the most ever collected at £180.7bn while corporation tax and related niche business taxes totalled a record £101.4bn, which HMRC said was up year on year due to ‘growth in onshore corporation tax receipts’.

National Insurance

National insurance is through the roof, with PAYE Class 1 employer NICs hitting a total of £143.9bn in 2025-26, up from £108.5bn in 2023-24 due to the huge rises implemented in April 2025 after the announcement at Budget 2024. Based on these numbers it would appear that the NICs raid has been even more lucrative for the government than original Treasury predictions.

Capital Gains Tax

Annual CGT receipts for financial year 2025-26 are 62% higher than in 2024-25, rising from £13.68bn to £22.18bn. The figures are put into stark contrast when compared with earlier years, but whether the government will benefit from continuing CGT revenue is questionable as business disposals were linked to pre-Budget rumours of huge rises in CGT rates which did not transpire.

Richard Jameson, partner in the private wealth team at Saffery, said: ‘The surge in CGT receipts is what the chancellor was aiming for when the 2024 Budget rumour mill went into overdrive.

‘So many individuals felt forced into crystallising capital gains at the CGT rate of 20% when rumours abounded about CGT rates rising in line with income tax rates. So, this bumper receipt was a shot in the arm for the public finances – it has brought forward tax receipts to a certain extent – and we’d expect CGT receipts to reduce in the coming years until another rate rise is threatened which impacts taxpayer behaviour.’

Jason Hollands, managing director at Evelyn Partners, pointed to the reduction in the tax-free threshold as another factor, while worrying about the longer term impact of business start-ups.

‘As the annual CGT exemption had been slashed by the previous government to a meagre £3,000 by April 2024 there was – and remains – little protection against CGT for investors selling assets, which will have turbo-charged the revenues from any pre-Budget disposals in the summer of 2024,’ said Hollands.

While the CGT tax take shot up in the last tax year, the likelihood of this lasting over the next 12 months is questionable.

Hollands warned: ‘Many might now wait for a future government to bring the CGT burden back down, others might be put off by the higher tax environment from setting up or investing in businesses in the first place.

Inheritance Tax 

Once again the tax that just keeps giving is inheritance tax as many thousands of estates are dragged in to the hugely unpopular death tax every month. 

Inheritance tax receipts have hit a fresh high of £8.5bn, surpassing last year’s total and marks the fifth consecutive annual record.

Annual IHT receipts for financial year 2025-26 were up by £216m, or 2.6%, compared to 2024-25, from £8.25bn to £8.46bn – the highest annual total on record and the highest March total on record.

With the state taking even more from estates, the ever rising inheritance tax bill is not likely to slow any time soon; in fact, with the new removal of reliefs for IHT on owner managed and private businesses, not to mention farmers through agricultural property relief, the squeeze will continue until at least the end of this parliamentary session, which could be as late as July 2029.

Susannah Streeter, chief investment strategist at Wealth Club, said: ‘The government has arguably made a mess of inheritance tax reform. Crackdowns on farmers and business owners proved unpopular and ultimately unworkable, forcing a partial retreat on relief thresholds.

‘But years of frozen allowances, combined with new rules that will bring pensions into the scope of IHT, mean more ordinary families, not just the wealthy, are being pulled into the tax net.

‘Frozen thresholds, unchanged for years, mean more estates are being pulled into liability even without meaningful gains in real-terms wealth.’

It will not be too long before the tax receipts hits £1 trillion, barring geopolitical uncertainty and threat to jobs from AI. But there are already more tax rises coming down the track next year with pension pots going under the IHT umbrella from April 2027, salary sacrifice pensions curbed from 2029, and even sooner, changes to ISA allowances next year to remove nearly half the current cash tax free savings limit in chancellor’s push to stocks and shares ISAs, promoted by Reeves at the London Stock Exchange today.

Income Tax

The extension of the threshold freeze until 2031 means there will be no respite for taxpayers facing ever increasing income tax bills as many are pulled into 40% rate. Latest figures show £278.2bn was paid in PAYE income tax, up 7.4% from £258.9bn, while self employed saw their bills rise to £56.2bn, up from £48.1bn on the previous year. With many more taxpayers dragged into 40p tax band, there are also concerns about the longer term impact on higher earners.

Tom Goddard, an assistant manager at Blick Rothenberg, said: ‘With the UK experiencing its highest tax burden in 70 years, there are signs that higher earners are relocating to more tax-efficient jurisdictions.

‘Historically, the top 1% of UK earners have contributed around 30% of income tax revenues, and any reduction in this group’s contribution risks shifting the burden further towards middle-income households.’

The impact of fiscal drag means ‘this financial pressure point won’t go away any time soon’, warned Goddard.

Source - Business & Accountancy Daily

HMRC Tax Receipts 2025-26 Annual Bulletin

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