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Government sees huge plummet in tax receipts

by LLB Editor
22nd May 20 1:27 pm

Tax received by HMRC falls 42% in April, compared to a year ago, figures out show today.

Income tax paid drops by 21% and National Insurance payments fell 18%.

VAT receipts are down 107% due to Covid-19 deferral scheme and air passenger duty, beer and spirits duties and fuel duties all plummeted in lockdown.

Laura Suter, personal finance analyst at investment platform AJ Bell, comments: “The first sign of the lockdown crunch on the Government’s tax take can be seen in its release of how much tax the nation paid in April – which has fallen off a cliff compared to last year. The total tax receipts taken by the Government in April dropped 42% compared to the same month last year, as people lost their jobs, staff were furloughed and businesses used Government coronavirus schemes to defer tax.

“The biggest fall was in VAT, with the total tax dropping 107% as companies deferred their payments under the Government’s package of measures to help boost firms’ cashflow during lockdown. The impact of staff seeing pay cuts, being laid off or being furloughed was seen in income tax receipts, which fell 21% while National Insurance payments fell 18%.

“The fact entire industries are closed has also hit the public purse, with beer duties having fallen 69% while pubs and restaurants keep their doors shut, and air passenger duty payments dropping 90% while the travel industry has ground to a halt. The impact of the property market being shut has also hit tax receipts, with a 43% fall in stamp duty during April.

“The Government faces a huge challenge ahead to deal with these falling tax receipts while also having to pay for its numerous support schemes during the current crisis. So far around £5.2bn has been spent on the Coronavirus job retention scheme, and it’s inevitable the public will see tax rises to help meet the shortfall.”

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