New figures from HMRC show total tax and National Insurance (NI) receipts hit a record £467.3 billion between April and September, £29.5 billion more than in the same six months last year. The data was published yesterday, ahead of next week's Budget.
Record tax take before Budget
The increase includes £17.8 billion more from income tax, capital gains tax and NI, £3.8 billion extra in VAT and £6.4 billion more from business taxes. Some of this rise reflects increasing wages, prices and business profits rather than new tax rates.
Over the full 2026/27 tax year, the total extra take is heading for £60 billion, according to the figures.
Impact of previous tax changes
Former Labour chancellor Rachel Reeves raised taxes by an estimated £40 billion in her first Budget and £26 billion in her second, affecting employers' NI, businesses, pensions, savings, capital gains, investments and inheritances. Those changes are now feeding into receipts, and their impact will grow because some have not yet come into force.
Labour's manifesto promised not to increase the headline rates of income tax, NI and VAT. Yet Reeves still increased employers' NI and extended the income tax threshold freeze, originally introduced by the Conservatives, through to 2031.
Fiscal drag and pensioners
As wages rise but tax thresholds do not, more people are drawn into paying income tax while existing taxpayers are pushed into higher bands, a process known as fiscal drag. Rachael Griffin, tax and financial planning expert at Quilter, said: "This happens without any change to the headline rates of income tax and shows just how effective fiscal drag has become as a revenue raiser for the Treasury."
A record 9.6 million pensioners pay income tax, and their numbers will climb again next April when the new state pension rises above the £12,570 personal allowance.
Borrowing and future tax measures
Despite the extra revenue, the government borrowed £21.2 billion in September alone, and total borrowing for the year could reach £150 billion.
Several of Reeves's changes have yet to come into force, including plans to bring unused pension funds into the inheritance tax net next April, a 2% increase in savings income tax, and a property and rental income surcharge due next April. Her pensions salary-sacrifice raid starts in 2029.
The £325,000 inheritance tax nil-rate band has not increased since 2009, and the £3,000 annual inheritance tax gifting allowance has been frozen since 1981. NFU Mutual calculates they would be £532,500 and more than £11,000 today if they had kept pace with inflation.
Chancellor John Healey may announce more tax increases next Wednesday, but even if he does not, the tax burden is already rising.
