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“The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing”. So goes Jean-Baptiste Colbert’s centuries old observation which remains as relevant today as ever.

HMRC’s latest annual corporation tax statistics show that annual corporate tax receipts increased by 10% in the year to March 2024 to another record of £93.3bn. 

This increase was hardly surprising following the jump in the main rate of corporation tax from 19% to 25% at the start of the year. But the fact that an increase of more than 30% in the main rate of corporation tax led to an annual uptick in receipts of only 10% is interesting and, presumably, means that UK taxable corporate profits are declining.

It could be a consequence of the introduction of full relief for capital expenditure. This may have stimulated business investment and dampened taxable profits at the same time that the tax rate increased and, if so, this may point to a healthy and strengthening corporate UK. 

Alternatively, it could indicate that at 25% the corporation tax rate is beyond optimal and is leading to the UK missing out on inward investment that would otherwise support the growth of the economy. 

HMRC’s sector analysis of the statistics showed that most industry groups across the UK economy saw small year-on-year increases or decreases. 

However, there were two industry groups that were large outliers in either direction. The mining and quarrying sector showed the biggest decline with a reduction in corporation tax payments of approximately £3bn. That looks to be a case of natural volatility in oil and gas prices after bumper prices in 2023, and the amount paid by the sector in the year to March 2024 was still significantly higher than in any of the four previous years.   

The other big outlier was the financial and insurance (F&I) sector which showed an increase in corporation tax receipts of more than £4bn or 27%. The F&I sector, whilst often the focus of negative publicity, contributes by far the most corporation tax of any sector in the UK. In the 2023-24 year, this sector accounted for around a quarter of all corporation tax receipts and more than double the next largest industry group, therefore the importance of the F&I sector contribution to the UK economy cannot be ignored. 

It is a near certainty that there will be tax rises in the upcoming Autumn Budget, although most of the focus is expected to be away from the corporate tax arena. However, many of the anticipated changes could impact mobile individuals working within the financial and insurance sector, such as the non-dom reforms and anticipated changes to capital gains tax. Those companies with the largest payrolls could also face additional costs if changes are made to employers’ National Insurance contributions. Such changes could ultimately flow through to employees themselves but there could be an indirect impact to corporate growth which might undermine the commitment to capping corporation tax rates.

The Chancellor will be mindful of the potential knock-on effect of swingeing increases in the tax burden on this population, in case the “hissing” from the sector becomes unbearable, or worse still, in case the UK’s golden goose takes flight.