Tax receipts have reached a record high for the tax year 2010-11, according to figures which have been updated on the official website of HM Revenue & Customs. Despite a stagnant economy, record levels of income tax have been paid reaching £447bn in 2010-11, a 10 percent increase on 2009-10. In 2007-08, income tax receipts reached a staggering £451bn, shortly before the credit crunch period.
VAT also benefited from an increase which was implemented in January 2011 to 20 percent, with receipts being boosted to £85bn from the previous £70 bn. National Insurance Contributions also reached record highs to almost £97bn. Rather than the higher receipts being due to the recovery of the UK economy, experts believe the rise in VAT, National Insurance and income tax rates for high earners are responsible. In 2011, the Institute of Fiscal Studies argued that the 50 percent rate of tax for taxpayers who earn over £150,000 wouldn’t raise revenues, as tax avoidance would increase. However, the record tax receipts do indicate the study may be incorrect.
The latest figures may also be an indication of the government’s refusal to scrap the 50p rate of tax. According to George Bull from Baker Tilly accountants, the Prime Minister has touched on the possible review of Child Benefit reform, which was due to be taken from high earners in 2013.
Since 1997 however, the only year when tax receipts dropped was 2009-10. The trend for increased tax receipts looks likely to continue, despite personal allowances being increased again in April 2012.
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