The tax contribution of the UK financial services sector remained at a record level in the year to 31 March 2019 with a total of £75.5bn paid to the public purse, according to a new report published today by the City of London Corporation.
This total contribution, comprising £33.4bn of taxes borne and £42.1bn of taxes collected, is broadly stable compared to last year’s £75.0bn despite ongoing economic uncertainty and represents 10.5% of all UK tax receipts.
Employment taxes have always made up the largest share of the sector’s tax contribution and this has not changed this year. Financial services firms employ 1.1m people across the country accounting for around 3% of all UK employment, generating 7.1% of GVA and 11.6% of all UK employment taxes (£34.5bn).
The report, Total Tax Contribution of UK Financial Services, produced by professional services firm PwC, finds that corporation tax receipts have fallen for the first time since 2014 as a result of profitability of participating companies declining in this year’s survey.
The report also highlights the difference of tax profiles by financial services sub-sector. For challenger banks, corporation tax made up 34% of their total tax contribution, compared with 15% across the banking sector as a whole. However, partly due to their smaller employment base, challenger banks’ share of contribution from employment tax was 37% – lower than the banking sector average at 50%.
Tax receipts from banks were found to be more dependent on where their employees and business operations are located, while insurers generate a higher proportion of taxes based on the location of their customers.
Catherine McGuinness, Policy Chair at the City of London Corporation said, “Despite a challenging economic climate and uncertainty around Brexit, the sector has maintained its tax contributions from the record high of last year.
“It is only right that the City continues to make a fair contribution to support the wider economy and public services.
“With Brexit looming, however, the UK must remain competitive to safeguard the sector’s employment base and significant tax contribution. The sector is vital to supporting prosperity right across the country. Besides 1.1m directly employed, it provides services such as bank accounts, mortgages and business loans on which millions more depend upon in their daily lives. It will play a critical role in fuelling our economic success after we leave the European Union.”
Andrew Kail, head of financial services at PwC said, “This report highlights the resilience of the financial services sector. Contributing more than one pound in every ten of total UK tax receipts, despite ongoing uncertainty, is a major achievement.
“A slipstream is being created across the sector due to technological advances; incumbents and challengers are disrupting the market, adapting to meet customer demand.
“New ways of working, operational business models, and technological disruption have the potential to change the employment profile – and therefore the tax profile – of firms across the sector. It’s important that we look closely at our tax system to ensure it’s fit for new ways of working and doing business while optimising the competitiveness of the sector post-Brexit.”