Rising tax take isn’t enough to plug growing government debt
HMRC’s rising tax take isn’t enough to plug the growing black hole of government debt, says leading audit, tax and business advisory firm, Blick Rothenberg.
Tom Goddard, an assistant manager at the firm, said: “HMRC, over the past 12-month period, have received £931.2bn from all tax streams. For the 12-months prior, it was £855.3bn, and £824.9bn before that. But those record hauls pale to insignificance in comparison to the £2.9tn national debt.”
He added: “Although HMRC’s total receipts are up 8.87% (£75.9bn increase) for the 12-month period to the end of February 2026 compared with the 12 months to February 2025, government borrowing continues to rise. The government borrowed £14.3bn in February 2026 alone, well above the forecasted £8.5bn predicted by the Office for Budget Responsibility (OBR).”
Tom said: “government spending is therefore increasing at a faster rate than they can generate through tax revenue. The issue is only exacerbated as a result of increasing Gilt yields which only add to the government’s debt crisis. Gilts are UK government bonds, issued to help finance public spending. When they are brought, the buyer is in effect lending money to the UK government – the increasing annual returns investors receive or yield means the government owes more money than the Gilts were originally worth.”
He added: “There is no doubt that the rise in government spending has been increased by the Middle East conflict and the resulting rising energy costs. A theme that will likely continue into the future. As a result, interest rates which were previously predicted to be cut during the year will likely be increased, as the bank of England’s governor is calling for.”
Tom said: “The chancellor will be glad to have the reported £23.6bn in fiscal headroom available in order to help mitigate the effects of geopolitical events on the country’s finances. However, as the economic cost of the conflict in the Middle East bites, the chancellor may have to make some tough choices on public spending, as taxes alone clearly can’t fill the debt black hole. One should however expect further tax increases in the Autumn budget if things continue as they are.”
He added: “Delving down further into HMRC’s statistics, tax collected via self-assessment tax return is up 16.58%, PAYE is up 7.66%, VAT 5.62%, Corporation tax 3.1%, NIC 15.3%, SDLT 15.53%, IHT 1.54% and UK CGT takes the crown at 59.2% (likely caused by many taxpayers wishing to crystallise any gains before the increase to capital gains tax which took effect from October 2024).”