Financial Services sector pays highest ever recorded tax contribution
- Total tax contribution for the sector reached £72.1 billion in the year to 31 March 2017 – a 1% increase on last year
- The figure makes up 11% of Government tax receipt
- Employment taxes generated the highest revenues of £31.4bn
New data reveals that the financial services sector has paid a record high of £72.1 billion in tax contributions in the last financial year. The report, commissioned by the City of London Corporation, is the highest amount of tax the sector has paid in the ten years that the data has been collected.
The figure is an increase of 1% on the tax paid last year (£71.4bn) and equates to 11% of all Government receipts.
The report, ‘Total Tax Contribution of UK Financial Services’, drafted by consultancy firm PwC, reveals the breakdown of the top three tax contributions:
- Employment taxes: the largest proportion of tax receipts from the sector came from employment taxes paid by both employers and employees, which contributed £31.4bn to the public purse and accounted for 43.5% of the taxes from study participants;
- Corporation tax: increased from £8.4bn in 2016 to £11.6bn for the sector, the second highest tax contribution from participants in the study (14.9%). The data includes the bank surcharge for the first time, which generated a total of £1.1bn;
- VAT: ranked as the third highest tax on financial firms, accounting for 14% of the total.
Additional taxes, such as stamp duties and business rates, made up the rest of the tax-take.
The report is the tenth in the series of the data to be collected and shows that the combined amount of tax paid by the sector in the last decade amounts to £649bn.
The data was collected from a number of domestic and foreign banks, insurers and asset managers and other financial firms based in the UK from 1 April 2016 to March 31 2017. The report was completed just nine months after the referendum, and so it is too early to give an indication of Brexit’s impact on the tax-take for the financial services sector.
Location plays a key role in the generation of financial services taxes. For banks in particular, more than half the sector’s total tax take comes from employment taxes (53.5%). If a large number of jobs were to leave the UK as a result of Brexit, then the tax revenues of the financial services sector would almost certainly be impacted.
Policy Chairman at the City of London Corporation, Catherine McGuinness, said:
“With Brexit edging ever closer, it is more important than ever to underline just how important the financial services sector is to the rest of the economy.
“The amount of tax paid by the sector in just one year could pay for around half of the annual NHS budget, or the lion’s share of the UK’s education budget.
“While it’s too early to gauge how the country’s tax-take might suffer if firms chose to move business away from the UK, these findings highlight how vital it is to meet the urgent needs of the sector as part of negotiations.
“Since the UK voted to leave the EU, the financial services sector has been crystal clear: we need urgent clarification around a transitional deal, a new mutually-beneficial trading relationship with the EU, and continued access to the brightest talent.”
Andrew Kail, head of financial services at PwC, said:
"The £72.1bn generated by the sector is 11% of the UK’s tax take and it’s generated across the country. London will remain one of the most important and attractive international centres for financial services and global business.
“However, the financial firepower of the UK’s regions is also put into sharp relief by this year’s report. To underpin this great performance, there must be a strong supply of local talent with the relevant skills, competitive costs and high productivity."
“But in order to flourish further, the sector deserves a simplification of the tax regime to support stability and international attractiveness.”
The UK’s financial services sector currently employs over 3% of the country’s workforce, accounts for 7% of output* and pays for 11% of total public spending.
For the first time in the report series, the data shows where the majority of financial jobs are located. Firms taking part in the study reported that Scotland (13.6%) and the South East (12.4%) employ the most financial services workers behind the UK’s capital, London (32.7%). Northern regions also account for a high number of the country’s financial sector workforce, with the North West (9.4%) coming in as the fourth biggest employer and Yorkshire & Humber ranking fifth (7.5%).
Press Office contacts:
Millie Allen, Financial Services Media Officer (Domestic), City of London Corporation
D: 0207 332 1388
M: 07710 860 886
Notes to Editors:
Output is the total value/amount produced by an industry/firm/worker. In this context, financial services account for 7% of all economic output, or 7% of all value added (i.e. GVA).
The data was collated from companies that represent a significant part of the financial services sector in the UK.
- In total, 50 financial services companies provided data on their UK tax payments for the 2016 study and together they employed 38.4 per cent of the total employees in the sector.
- Taxes borne are a company’s direct contribution to tax revenues. They are all the taxes levied on a company, which are its cost and will affect its results. They include corporation tax, employers’ national insurance contributions (NIC), irrecoverable VAT, and business rates.
- Taxes collected are generated by a company’s business activity and are part of its indirect contribution to tax revenues. Taxes collected include employee income tax and NIC administered through the payroll, and the insurance premium tax charged to customers. These are the taxes of employees and customers respectively, but are collected from them by companies and paid over to the Government.