Corporation Tax Hike Drives UK Business Tax Payments to £215 Billion

The share of UK taxes paid directly by businesses and employers has risen by 20% over the last decade, now accounting for 25.6% of all UK tax revenue, up from 21.7%, according to research by global content and technology firm Thomson Reuters.

The total amount of business taxes has nearly doubled in ten years, increasing from £114 billion in 2014/15 to £215 billion in 2023/24. A key factor in this surge is the corporation tax hike from 19% to 25% in April 2023, which has more than doubled its revenue from £42.9 billion to £89.7 billion, growing faster than overall HMRC receipts.

The increase in employer’s National Insurance announced at the recent Budget is forecast by the UK Government to add a further £24billion per year, or 11%, to the tax bill for employers when it comes into effect from April 2025.

The overall global tax bill for UK businesses operating abroad is also expected to rise following the increase in corporation tax to meet the global minimum tax rate of 15% in many countries, including Ireland. ‘Real time’ reporting of VAT obligations in the EU – under e-invoicing rules – may also increase the real cost of VAT borne by UK businesses operating in the EU.

As well as having to deal with an increase in their direct tax bill, businesses are also having to deal with a number of new taxes introduced in recent years such as the Diverted Profits Tax, Plastic Packaging Tax and Digital Services Act, which add to the complexity of their tax affairs.

Jas Sandhu Dade, Head of Corporates, Europe at Thomson Reuters, says: “HMRC is keeping a keen eye on businesses and failure to accurately onboard regulation changes could pose substantial risks for corporates. In-house tax teams are facing an ever more complex tax landscape. With the volume of their work growing faster than firms’ capacity, technology is quickly becoming an essential way to not only manage the increased workload but also to improve results. Tools like generative AI present compliance advantages. Businesses are increasingly investing in AI-powered tools such as e-invoicing software to improve VAT compliance, helping to prevent conflict with HMRC.”

Thomson Reuters recently announced the launch of ONESOURCE with CoCounsel to customers globally, combining a new AI Product Support skill with CoCounsel, Thomson Reuters professional-grade generative AI assistant. Available now, the enhanced solution supports corporate tax departments with improving efficiency in indirect tax determination, compliance and e-invoicing.