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Which sector pays the greatest share of corporation tax?

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At £56.2bn, corporation tax receipts in 2017/18 are 11% higher than in 2016/17. This is a record for the UK.

For 2016/17, the industrial and corporate sector had corporation tax liabilities of around £37bn. This is the highest figure ever for that sector and exceeds the combined liabilities of the industrial and commercial sector, financial and life insurance as recently as 2013/14. It is tempting to conclude that the UK industrial and commercial sector is powering ahead, in part perhaps because of lower corporation tax rates, but it must be remembered that these figures reflect economic performance anything up to two years ago. The tax impact of current uncertainties will not be seen in the data for another one to two years.

By industrial sector, the financial and insurance sector is by far the greatest contributor with liabilities for 2016/17 of £12.4bn. It was also the largest in 2015/16 (£7.7bn). While it is arguable that global economic conditions along with post-Brexit regulatory issues will have the greatest impact on the future of the City of London, these figures are a timely reminder of the economic importance of this sector, the contribution it makes to the nation’s tax yield and the need to safeguard it post-Brexit.

On the tenth anniversary of the great financial crisis, the banking sector data make particularly interesting reading. In 2005/06, the banking sector paid 19.9% of UK corporation tax receipts. This hit a low of 3.9% in 2011/12 and has now increased to 12.2% for 2017/18. With a continuing emphasis on the development of sustainable practices in the banking sector, it will be interesting to see whether corporation tax receipts are also sustained at around 12% of the UK total.

During 2017/18, the banking sector contributed around 7% of total PAYE across the UK economy. Since 2005/06, that figure has stayed stable at between 6% and 8% which reflects both employee numbers and remuneration practices in the sector.

Interestingly, between 2008/09 and 2017/18, PAYE income tax across the whole of the UK increased from £128bn to £154bn, an increase of 20%. Recent warnings from large employers emphasise how important it is that the government should provide as much certainty and stability as possible before Brexit and during the following transition period.

Issue: 1413
Categories: In brief