The Upswing in UK Corporation Tax: 2022-2023 Data

Financial matters often seem complex and unapproachable, but understanding how they affect us and our economy is crucial. This review summarises key points drawn from the latest UK Corporation Tax statistics, digesting the numbers into simple everyday language.

A Look Inside: About The Report

The annual publication showcases data from various Corporation Taxes collected over the financial years, shedding light on the economy’s health and the different contributors. Corporation Taxes covers several subcategories:

  • Corporation Tax, encompassing both onshore and offshore
  • Bank Surcharge
  • Bank Levy
  • Residential Property Developer Tax (RPDT)
  • Energy Profits Levy (EPL)

The current release runs up until the financial year ending in March 2023 and also shares initial Corporation Tax liability estimates for company accounting periods ending between April 2021 to March 2022. Eye-catchingly, it’s the first time that Corporation Tax receipts have been classified by Standard Industrial Classification (SIC) of economic activity.

A Year of Increase: Headline Findings

From a broad perspective, the increase in total Corporation Tax receipts by £17.3 billion (a growth of 26% from the previous year) marks an uplifting trend for the 2022-2023 financial year.

Banking was the largest contributor sector, with Financial and Insurance receipts (including Bank Levy and Bank Surcharge) accounting for £18.4 billion or 22% of all Corporation Taxes.

Further, the 25% growth in Corporation Tax liabilities to a total of £12.9 billion can mostly be attributed to a sharp upturn in trading profits, as opposed to decrease in deductions or losses.

In particular, 2021-2022 saw a 20% hike in capital allowances claims owing to the introduction of the super-deduction policy, contributing over £30 billion (26% of the total). Lastly, an interesting statistic shows that just a sliver of companies (about 5,400 or 0.4%) accounted for 56% of total Corporation Tax liabilities, totalling an impressive £36.4 billion.

Dissecting the Trends: Corporation Tax Receipts

Over the years, trends have fluctuated for a variety of reasons:

  • Corporation Tax receipts for 2022 to 2023 amount to £84.7 billion, up by £17.3 billion (26%) from the previous year. This significant increase largely resulted from a strong economic recovery post-pandemic, considerable growth in offshore receipts, and the implementation of the Energy Profits Levy (EPL).
  • The 2019 to 2020 period saw earnings increase partly due to a roll-out of new payment timings for larger companies, resulting in earlier payments.
  • Onshore Corporation Tax receipts for 2022 to 2023 stand at £71.4 billion, up from last year’s by £9.9 billion (16%).
  • Offshore Corporation Tax receipts witnessed a closer to three-fold increase of £4.6 billion (230%) compared to the previous year, aligning with the soaring prices of oil and gas which in turn invertedly related to energy companies’ profits.
  • The Residential Property Developer Tax and Energy Profits Levy, both unveiled in the 2022 to 2023 financial year, gathered £0.2 billion and £2.6 billion respectively.

Industry-wise Breakdown: Receipts by Economic Activity

Every sector plays a unique role in driving the economy:

  • Financial and Insurance remained the top contributor with £18.4 billion or 22% of total receipts, showing a 7% elevation since last year.
  • The Mining and Quarrying sector ranked next, contributing £10.6 billion.
  • The Wholesale and Retail Trade sector stood third, donating £8.7 billion or 10%, with an encouraging 11% increase over the last fiscal year.

Post-Pandemic Progress: Corporation Tax Liabilities

The 2021-2022 financial year saw a 25% swell in Corporation Tax liabilities from £51.5 billion to £64.5 billion, significantly more than pre-COVID-19 levels. This massive jump can be attributed to the post-pandemic recovery where businesses reported heightened trading profits.

The Super-Deduction Effect: Capital Allowances

Capital allowances are tax benefits for businesses that let a company subtract the value of an item from its profits.

In 2021-2022, the innovative ‘super-deduction’ policy was enforced. The super-deduction allows a generous 130% rate in the first year of an investment. This contributed to a significant increase in total capital allowances claims for 2021-2022. It is important to note that the figures for 2021-2022 represent a partial year of super-deduction data due to the policy’s introduction time.

Closing Thoughts: The Bigger Picture

Ultimately, these statistics symbolise the recovery and growth of our economy, an encouraging sign for UK citizens. As we continue to bounce back from the aftermath of the pandemic, understanding these circumstances adds greater depth to the conversations around our economic fortitude.