A brief guide to the public finances: Income

In 2021-22, we expect the public sector’s income to amount to £987.5 billion, equivalent to £35,000 per household or 39.3 per cent of national income. This income is called ‘public sector current receipts’ in the official statistics and comes from many sources.

 

 

Taxes are the most important at 90 per cent of the total in 2022-23. The taxes that bring in the most money are income tax and National Insurance contributions, which together are expected to raise around £425 billion. Value added tax (VAT) is the next most important, expected to raise £154 billion. Other big taxes include corporation tax, council tax, business rates, VAT refunds, fuel duty, capital gains tax and stamp duty land tax. No other tax is expected to raise more than £20 billion.

The public sector also receives other revenues, including interest earned on its assets (such as foreign exchange reserves and student loans), while public corporations generate some income.

Over the next five years, we expect total receipts to rise by 19 per cent, faster than the growth in the cash size of the economy. We expect most taxes to rise more quickly than the growth of the economy as a whole, including income tax (driven in part by wages and salaries growing faster than nominal GDP, and frozen tax thresholds dragging more income into higher tax brackets), VAT (due to a rise in the share of consumption on standard rated goods) and corporation tax (due in part to higher profits than expected). But some tax receipts are expected to fall, for example tobacco duty from 2023-24 onwards (because people are smoking less).

 

(Office for Budget Responsibility)

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