As a lot as Rachel Reeves is determined for some excellent news, specialists say the numbers don’t essentially replicate a more healthy financial system.
Rachel Reeves addresses elevating taxes ‘considerably’
New HMRC figures have unveiled the true scale of Chancellor Rachel Reeves’s tax raids, as receipts elevated sharply final yr. The newest bulletin from the tax authority reveals that PAYE Revenue Tax and Nationwide Insurance coverage contributions totalled £347.8 billion between April and December 2025 – £36.3 billion greater than the identical interval final yr.
The numbers kind a part of HMRC’s wider replace protecting Revenue Tax, Capital Good points Tax and NICs, which collectively introduced in £371.8 billion over the nine-month interval. That’s £39.4 billion greater than a yr earlier. Though the info paints an image of stronger Treasury inflows, specialists say the headline rise doesn’t essentially replicate a more healthy financial system. The rise, they argue, is basically pushed by frozen tax thresholds and the influence of fiscal drag.
New HMRC figures have delivered a uncommon increase for Chancellor Rachel Reeves (Picture: Getty)
Shaun Moore, tax and monetary planning knowledgeable at Quilter, mentioned the figures masks deeper issues within the system.
He mentioned: “HMRC’s newest tax receipts for December might look encouraging at first look, however the headline figures flatter to deceive.
“Whereas they provide the Treasury a constructive approach to shut the calendar yr, they more and more replicate a tax system formed by structural design selections slightly than a real enchancment in financial circumstances or family funds.”
PAYE receipts sometimes rise in December as a result of bonus funds, however Mr Moore mentioned the actual stress is coming from the Authorities’s determination to freeze tax bands.
He defined: “December is usually boosted by bonus funds and year-end pay changes, which may briefly inflate the figures. Nonetheless, the extra persistent driver stays fiscal drag.
“With earnings tax thresholds frozen, a rising variety of individuals are being pulled into greater tax bands or paying extra tax on the identical actual degree of earnings.
“Whereas headline tax charges haven’t modified, the share of earnings being taken in tax continues to rise within the background. This implies greater marginal charges are being encountered earlier in individuals’s careers, with none single second that seems like a conventional tax rise.”
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In response to HMRC, Self Evaluation receipts additionally elevated, reaching £22.8 billion from April to December – up £3 billion on the identical interval final yr.
Mr Moore mentioned the Authorities is benefiting from a gradual squeeze on family funds, including: “Over time, this method delivers a gentle uplift in revenues, nevertheless it does so by progressively stretching family budgets slightly than reflecting broad-based enhancements in productiveness or residing requirements.”
Capital Good points Tax (CGT), in the meantime, fell in December, dropping to £231 million in contrast with £335 million a yr earlier.
For the April-December interval, receipts totalled simply over £1.8 billion, barely beneath final yr.
Mr Moore mentioned the outcomes present how unpredictable CGT could be. He added: “In follow, the info continues to indicate how delicate capital taxes are to behavior. Confronted with bigger potential payments, traders typically delay promoting, cut back disposals or restructure their affairs, which may dampen receipts even underneath a harder regime.
“Consequently, CGT stays one of the vital unstable elements of the tax system and an unreliable supply of steadily rising income.”
Specialists say figures masks deeper issues within the system (Picture: Getty)
Inheritance Tax (IHT) earnings additionally continued to rise, hitting £6.6 billion, which is £0.2 billion greater than final yr. With the edge frozen at £325,000, extra households are being pulled into the tax.
Mr Moore mentioned: “Though progress in IHT receipts can seem comparatively modest month to month, the longer-term pattern stays firmly upwards. What was as soon as seen as a tax affecting a comparatively small minority is more and more changing into a part of mainstream monetary planning.”
He additionally warned that the stress will improve once more when pensions fall underneath IHT guidelines from 2027.
With the top of the tax yr approaching, Mr Moore mentioned households ought to think about using allowances earlier than April.
He added: “Making use of accessible allowances, similar to ISA contributions, pension funding the place applicable, and the annual gifting allowance, can nonetheless play an necessary position in managing liabilities and stopping fiscal drag from doing much more injury over time.
“For a lot of households, planning forward is changing into much less about refined tax avoidance and extra about merely defending as a lot of their earnings and financial savings as doable from a system that’s changing into extra demanding every year.”
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