UK financial services sector makes record tax contribution
The tax contribution of the UK financial services sector hit a record high total of £75.0bn in the year to 31 March 2018, according to a new report published today (4 December) by the City of London Corporation.
The figure is an increase of 4.0% on the tax contribution last year (£72.1bn) and equates to 10.9% of all UK tax receipts.
The report, Total Tax Contribution of UK Financial Services, produced by professional services firm PwC, shows that corporation tax jumped from £11.6bn in 2016-17 to £14.1bn this financial year.
An important factor driving this increase was a full year of the bank corporation tax surcharge, which accounted for £1.8bn. The financial services sector paid 25.1% of UK corporation tax receipts in 2018.
Financial services firms employed 1.1 million people across the country or 3.4% of all UK employment. Employment taxes , a relatively stable source of tax revenue, that do not depend on profit, accounted for £32.9bn, the largest proportion of tax receipts from the sector. This total accounts for 11.5% of UK employment tax receipts.
Catherine McGuinness, Policy Chair at the City of London Corporation, said:
“This data shows that the financial services industry paid a record amount of tax in 2018 to bolster the public finances. The sector now accounts for over a quarter of corporation tax receipts as the bank surcharge took full effect.
“With Brexit edging ever closer, it is more important than ever that the UK remains competitive to safeguard the sector’s employment and tax base.
“It is crucial that we avoid a no-deal Brexit that could jeopardise financial stability and drive activity away from the UK. In particular, we need to secure a transition period, deliver a mutually-beneficial future trading relationship and ensure the sector has continued access to skilled talent.”
Andrew Kail, head of financial services at PwC, said:
"The analysis shows the continuing importance of the UK financial services sector to the overall economy. The tax contribution of the sector at £75bn is more than a tenth of all tax receipts for 2018. This reinforces the value of the sector, which has steadily contributed between 10-14% of all UK taxes collected since 2007, despite major financial disruption.
“Our financial services sector is one of our world class industries and generates not only large tax revenues to fund vital public services but provides employment for millions of people, generates a significant trade surplus and most importantly provides key products and services that its customers rely upon on a daily basis.
“As the industry navigates its future path it needs to focus more heavily on meeting its customers’ needs and driving higher levels of trust. At the same time its overall financial and social contribution to the economy and wider society needs to be fully appreciated and valued.”
A total of 47 financial services companies provided data on their UK tax payments for the 2018 study, together employing 38.0% of employees in the sector. This included domestic and foreign banks, insurers and asset managers.
Notes to editors
About the City of London Corporation
The City of London Corporation is the governing body of the Square Mile dedicated to a vibrant and thriving City, supporting a diverse and sustainable London within a globally-successful UK. www.cityoflondon.gov.uk
At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 158 countries with over 250,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at www.pwc.com.
- Taxes borne (£33.5bn) 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 (£41.5bn) 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.