Big tax shift for the UK

PAYE income tax and National Insurance receipts reached £92.2 billion across April and May, £7.5 billion more than the same period a year earlier.

The figures, published on Friday (19 June) in HMRC’s monthly receipts bulletin, show gross HMRC tax and NICs receipts of £153.7 billion for the two months to May, up £9.8 billion year on year.

Income tax, capital gains tax and NICs combined came to £91.3 billion, an increase of £7.2 billion. HMRC recorded its highest-ever PAYE receipts for the month of April.

The personal allowance and higher-rate thresholds remain frozen at their 2020-21 levels, a freeze the government has confirmed will run up to and including the 2030-31 tax year.

Wealth manager Quilter said the data reflected the sustained impact of frozen income tax thresholds, describing fiscal drag as a central feature of the system that pulls more income into higher bands as nominal pay rises.

The firm noted that even as real-terms earnings growth moderates, higher nominal pay is increasingly offset by a rising tax bill for many households.

Inheritance tax dips as pension change approaches

Inheritance tax receipts were £1.4 billion across April and May, £37 million lower than the same period last year.

HMRC said it expects higher receipts in the coming years, citing higher volumes of wealth transfers following recent liable deaths, rises in asset values, and the decision to hold tax-free thresholds at 2020-21 levels through to 2030-31.

Unused pension pots are due to be brought within the taxable estate from April 2027.

Quilter said this is the final year in which pension wealth remains outside the scope of inheritance tax, and that the change will increase the number of families facing a liability.

The firm said frozen thresholds and the inclusion of pensions point towards steadily rising liabilities.

Capital gains receipts fall

Capital gains tax receipts for May were £168 million, £64 million lower than May last year, according to Quilter.

The firm said CGT is particularly sensitive to behaviour, with receipts often driven by the timing of disposals rather than market performance alone, and pointed to a tighter regime following the reduction in the annual exempt amount and higher CGT rates on shares and other assets.

Burnham win sharpens wealth tax debate

The receipts data lands days after Andy Burnham won the Makerfield by-election, returning the Greater Manchester mayor to the House of Commons and setting up a potential Labour leadership challenge to Keir Starmer.

Quilter noted Burnham has previously argued for replacing inheritance tax in its current form with a broader levy on wealth or estates, often linked to funding social care, but has indicated any near-term policy would remain within Labour’s existing manifesto commitments and fiscal framework.

The by-election was triggered when the sitting MP resigned his seat on 18 May to allow Burnham to contest it, a move tied to party rules requiring any leadership candidate to sit in the Parliamentary Labour Party.

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