interactive investor comments on the latest HMRC tax receipts

The latest bumper tax haul offers clues as to why the tax cutting mini-budget was a dud with markets.

Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “The latest HMRC tax receipts data offers some clues as to why the tax-cutting measures announced in the ill fated mini-budget did not sit well with UK markets.

“With public finances at its most stretched since the post-Second World War era, the government needs money, and lots of it, to plug the gaping financial black hole. The higher-than-expected uptick in the UK public sector net borrowing figure to almost £20 billion last month, the second-highest September borrowing figure since monthly records began in 1993, exacerbates matters. 

“However, the bumper tax haul of £368.9 billion from between April to September - £35 billion higher than in the same period a year earlier - could go some way towards shoring up the public’s finances.

“But more tax pounds in the government’s pocket could pile financial pressure on taxpayers amid rampant inflation. The freezing of the income tax threshold and wage inflation have pushed a large number of workers into higher tax brackets. But wage growth continues to trail behind runaway inflation, which returned to a 40-year high in September, leaving less money in our pockets and makes it harder to save and invest to build wealth. Known as ‘fiscal drag’, this is the ultimate stealth tax.

“While the 1.25% increase to National Insurance U-turn will ease matters – as long as it remains in the bin –the freezes to various tax-free allowances and thresholds in addition to rising prices are set to dent millions of pay packets in the coming years.

“The new chancellor, Jeremy Hunt, has warned that ‘decisions of eye-watering difficult’ will be needed to get the UK economy back on an even keel. What that means for taxpayers remains unclear, but the harsh reality is many consumers have run out of eyelets on their belts to tighten.”