The business tax contribution

A recent study has found that UK businesses are continuing to contribute significantly towards Government revenues, with £186 billion in business taxes being paid in 2017/18, accounting for 27 per cent of the total tax take.

Analysis by the Confederation of British Industry (CBI) suggests that the revenue supplied by business tax is almost as great as the 2017/18 for budgets for health and education combined, which were £124.7 billion and £66.4 billion respectively.

The most significant taxes paid by businesses in the UK are employer National Insurance Contributions (NICs), corporation tax and business rates, which together add up to more than three-quarters of tax contributions made by businesses.

Corporation tax receipts have been increasing over the past 10 years, growing by more than 50 per cent since they dipped during the 2008/09 financial crisis. Receipts are now above pre-crisis levels and have continued to increase, even though economic growth has been relatively poor.

There is no simple explanation for this, particularly since the headline corporation tax rate has fallen from 28 per cent to 19 per cent over the period. However, one reason could be because more firms are coming to set up in the UK.

Revenue from business rates has also increased over the last decade but given the number of firms that now inhabit a purely digital world and the number of businesses that no longer require a physical presence, it is debateable whether they can continue to increase in their current form in the longer term. In addition, revenue from NICs has increased, albeit more in the form of employee NICs rather than employer NICs.

However, while these taxes are the main contributors to the overall business tax take, there is an increasingly large number of “other” taxes, such as the bank levy and the apprenticeship levy, both of which contribute to the increasing tax burden faced by businesses.

Leave a Reply