In April alone, more than £2bn was raised from employer’s national insurance, even before the full impact of the recent increases is felt, while inheritance tax saw a 14% rise in just one month.
Tax bills are at their highest levels in decades, with frozen thresholds and rising costs putting additional strain on both individual and business taxpayers. However, surprisingly, HMRC is receiving less revenue from penalties, which dropped to £830m in the 12-month period from May 2024 to April 2025, compared to £1.14bn the previous year.
The latest HMRC tax revenue statistics show that employer NICs reached £12.66bn for April, marking the highest amount ever recorded. This was up from £10.52bn in March 2025, a £909m increase from the previous year, placing the government on track to collect up to £24bn from the significant tax hikes on businesses.
Somewhat concerning is the fact that HMRC noted these figures were “largely related to March liabilities,” meaning they don’t fully reflect the effects of the significant April hike in PAYE NIC1 bills for businesses. The full impact of this increase will be reflected in next month’s data.
Overall, tax receipts continue to rise, with April 2025 bringing in £80.2bn, a £4.3bn increase compared to the same period in 2024.
Despite the previous chancellor’s 4% reduction in employee NICs, expected to cost around £12bn annually, the impact has not been as anticipated. In fact, the April 2025 figure was £17.55bn, up £370m from £17.18bn in April 2024.
Frozen thresholds have continued to put pressure on taxpayers, contributing an additional £2.5bn burden in April 2025, as income tax receipts reached £29.82bn, up from £27.41bn the year before.
The most notable increase was in inheritance tax, which surged by an alarming 14% in a single month to £780m, representing one of the largest monthly hauls ever.
While inheritance tax is influenced by the size and value of estates, HMRC noted that monthly variations could be partly due to a small number of larger-than-usual payments. Nevertheless, the overall IHT take for the past 12 months has hit a record £8.34bn, up from £7.58bn the previous year, and it is on a steadily rising trajectory as more individuals fall within its scope.
Nicholas Hyett, investment manager at Wealth Club, commented, “Over the past 20 years, inheritance tax receipts have more than doubled from £3.3bn to £8.2bn. Given the strong start to the 2025-26 tax year, this trend is likely to continue. It’s no coincidence – leaked government documents revealed that inheritance tax is viewed as a cash cow by some members of the cabinet.”
The government’s focus on historically IHT-exempt investments, such as pensions, private company shares, and AIM-listed shares, has created uncertainty, deterring investment. Hyett pointed out that the uncertainty surrounding the AIM market, in particular, has been a significant concern.
IHT revenue is expected to grow even further when new rules on taxing pension pots come into effect in 2027, continuing the upward trend.
Laura Hayward, tax partner at S&W, added, “With the nil-rate band remaining frozen until at least 2030, and upcoming reforms to inheritance tax, we expect this trend to persist. Many clients are seeking advice on how to mitigate these changes. Speculation is increasing that the chancellor may need to raise taxes at the autumn Budget to meet spending commitments, which could result in further modifications to inheritance tax policy.”
Stamp taxes, including stamp duty land tax (SDLT) and share taxes, rose by a third, driven by an uptick in property sales as people rushed to complete transactions before the end of the post-Covid SDLT reduced rates. SDLT alone raised £1.30bn, slightly down from £1.40bn the previous month. With house prices increasing by over 6% annually, property taxes are expected to keep rising.
VAT receipts also saw an increase, reaching £18.3bn in April, up from £17.6bn the previous year. With inflation at 3.5%, it seems unlikely that VAT will decrease in the near future. This represents a historically high VAT take for April, nearly £2bn more than the same period in 2023.
Fuel duty receipts were also robust in April, hitting £2.0bn, £74m higher than last year’s £1.92bn, although slightly down from March figures. This increase occurred despite falling petrol and diesel prices, which benefit consumers but raise questions about how the government will replace this revenue as electric vehicle targets are met. It also suggests a potential area for tax increases when the Budget is announced, as the fuel duty escalator remains frozen.
Sheena McGuinness, co-head of energy and natural resources at RSM UK, observed, “Although most taxes have seen an increase, fuel duty receipts are on the decline. This is particularly striking given the overall rise in tax revenues, with the 2023-24 tax year showing an annual increase of 5.3%. Meanwhile, the energy sector is facing continued investment uncertainty, especially with falling profitability in renewables. This raises doubts about the government’s ability to meet its net-zero ambitions.”
Meanwhile, the government’s spending deficit ballooned to £20.2bn, up from £16.4bn the previous month, which has led to calls for the chancellor to reconsider her self-imposed fiscal rules.
Professor Joe Nellis, economic adviser to MHA, stated, “Low growth leads to reduced tax revenues and lower government income, making it nearly impossible for the chancellor to balance public spending and revenue without stifling growth with higher taxes. Of the government’s two economic goals—cutting the deficit and stimulating growth—growth must be prioritised.”
He continued, “The Chancellor should consider abandoning her fiscal rules to allow for public and corporate investment, focusing on recalibrating the economy for sustainable growth.”
