In 2024/25 VAT tax receipts in the United Kingdom amounted to just over 170 billion British pounds, compared with 168 billion in the previous financial year. Along with income tax and National Insurance contributions, VAT is one of the three-largest taxation sources for the UK government. Unlike income tax and national insurance, VAT is an indirect tax, and is raised via a 20 percent levy applied on most goods and services sold in the UK. Tax revenue during the pandemic VAT tax revenue took quite a significant hit during the COVID-19 pandemic, with receipts falling from just under 130 billion pounds in 2019/20 to around 102 billion in 2020/21. The lockdowns enforced by the UK government clearly had an effect on consumer spending, but also impacted taxes associated with travel. Revenue from air passenger duties also fell, from 3.6 billion pounds to just 590 million, elsewhere fuel duties fell from 27.6 billion to 20.9 billion. How UK taxes are spent For the 2025/26 financial year, the UK government is expected to spend 379 billion pounds on social protection, which includes spending on housing benefits and pensions. After social protection, health had the next largest budget, at 277 billion pounds, followed by education at 146 billion. As of this year, the government was paying 116 billion pounds on debt interest, while defence spending was 83 billion pounds.

In 2024/25 the value of tax receipts for the United Kingdom amounted to approximately 840 billion British pounds. Tax receipts form the bulk of UK government income, based on various direct and indirect taxes. Although tax income has gradually increased throughout most of this period, there is a noticeable dip in 2020 due to the COVID-19 pandemic. Tax revenue sources Of the revenue generated by taxation in 2024/25, over 301 billion of this came from Income Tax receipts, which was the main source of direct tax income for the government. After income tax, the next most substantial direct tax were contributions from National Insurance, which amounted to just over 172.5 billion pounds of tax revenue. The UK's main goods and services tax; Value-added Tax (VAT) amounted to 170.6 billion pounds, while Corporation Tax receipts raised 91.6 billion pounds. Although other smaller direct and indirect taxes produce notable income, these four sources were by far the main sources of income in the previous financial year. UK government finances While taxes and other sources of income raised more than 1.13 trillion pounds in 2024/25, the UK government expenditure was around 1.28 trillion pounds. This gap between revenue and expenditure was financed via government borrowing, which amounted to almost 152 billion pounds. As the UK government has been spending more than it earns for several years, this has resulted in a significant government debt of 2.8 trillion pounds building up, the equivalent of just under 96 percent of GDP in 2024/25.

In 2024/25, income tax receipts in the United Kingdom amounted to 301 billion British pounds, compared with 275 billion in the previous year. Although the value of income tax receipts has grown quite consistently throughout this period, there is a sharp increase observable from 2021/22 onwards. The period of high inflation from 2021 onwards led to faster wage growth, which pushed many UK workers into higher tax bands, resulting in the increased income tax revenue. Income tax brackets The amount which workers in the United Kingdom pay in income tax is determined by how much they earn, placing them in different income tax bands. All workers in the United Kingdom are entitled to earn a personal allowance of 12,750 pounds before they are charged income tax. The Basic rate of 20 percent applies to income between 12,750 and 50,270 pounds, with a higher rate of 40 percent charged on incomes between 50,271 and 125,140 pounds. The highest tax band stands at 45 percent, for earnings over 125,140 pounds. Main UK taxes Income tax is the largest source of UK government revenue, accounting for 11 percent of gross domestic product in 2025/26. Value Added Tax was the next largest source of UK government revenue, followed by National Insurance, and Corporation Tax. Value Added Tax or VAT is the largest indirect tax in the UK, and is raised via a 20 percent levy on most goods and services sold in the UK. National Insurance Contributions form an additional direct tax on earnings in the UK, while Corporation Tax taxes the profits of companies resident in the UK.

Monthly data showing Value Added Tax (VAT) flash estimate turnover diffusion indices using data from HM Revenue and Customs (HMRC) VAT returns. These are official statistics in development. Source: HMRC

Value Added Tax (VAT) turnover and expenditure diffusion indexes and new VAT reporters using data from HM Revenue and Customs (HMRC) VAT returns.

In 2022/23, income tax accounted for 9.8 percent of gross domestic product in the United Kingdom, the largest tax as a share of GDP in this financial year. Throughout this time period, income tax has accounted for the highest share of GDP among UK taxes, followed by VAT and National Insurance Tax being the second-largest tax, depending on the relevant year. What does the government spend this on? For the 2025/26 fiscal year, the UK government expects to spend around 379 billion British pounds on social protection, which includes spending on pensions and welfare. The budget for health spending is 277 billion pounds, followed by 146 billion pounds on education. Since the 1980s, the share of GDP the UK spends on health has increased substantially, growing from four percent in 1984/85, to seven percent before the COVID-19 pandemic. By contrast, spending on defence fell from 4.6 percent of GDP to just 1.8 percent in the same time period. Debt approaching 100 percent of GPD The fourth-largest spending category in the latest UK government budget was that of debt interest, at a substantial 126 billion pounds. After taking a significant economic hit during the COVID-19 pandemic, the UK's government debt increased from around 80 percent of GDP, to almost 97 percent in one fiscal year. Although that debt is not expected to increase further in the coming years, the costs of financing that debt has put immense pressure on government finances, especially with rising borrowing costs.

The United Kingdom government generated a revenue of some **** billion British pounds from energy taxes in 2022. This figure represents an increase of about *** percent in comparison to the previous year. In the period of consideration, figures peaked in 2019 at nearly ** billion British pounds.

In 2024/25 fuel duty tax receipts in the United Kingdom amounted to approximately 24.7 billion British pounds, compared with 24.8 billion pounds in the previous financial year.

United Kingdom TE: RC: API: Tax: on Products: VAT data was reported at 34,214.000 GBP mn in Mar 2018. This records a decrease from the previous number of 35,899.000 GBP mn for Dec 2017. United Kingdom TE: RC: API: Tax: on Products: VAT data is updated quarterly, averaging 3,196.000 GBP mn from Mar 1946 (Median) to Mar 2018, with 289 observations. The data reached an all-time high of 35,899.000 GBP mn in Dec 2017 and a record low of 0.000 GBP mn in Mar 1973. United Kingdom TE: RC: API: Tax: on Products: VAT data remains active status in CEIC and is reported by Office for National Statistics. The data is categorized under Global Database’s UK – Table UK.AB023: ESA10: Resources and Uses: Total Economy: Primary Income.

United Kingdom CG: RC: sa: API: TP: Taxes on Pdt Excluding VAT & Import Tax data was reported at 23,076.000 GBP mn in Jun 2018. This records an increase from the previous number of 22,110.000 GBP mn for Mar 2018. United Kingdom CG: RC: sa: API: TP: Taxes on Pdt Excluding VAT & Import Tax data is updated quarterly, averaging 13,282.500 GBP mn from Mar 1987 (Median) to Jun 2018, with 126 observations. The data reached an all-time high of 23,076.000 GBP mn in Jun 2018 and a record low of 5,247.000 GBP mn in Jun 1987. United Kingdom CG: RC: sa: API: TP: Taxes on Pdt Excluding VAT & Import Tax data remains active status in CEIC and is reported by Office for National Statistics. The data is categorized under Global Database’s United Kingdom – Table UK.AB041: ESA10: Resources and Uses: Central Government: Primary Income.

The Tax Preparation Software Developers industry's revenue is supported by the fact that tax returns are required to be submitted every year, making revenue less susceptible to any economic downturns. The HMRC's Making Tax Digital (MTD) policy has catalysed the industry's revenue growth by mandating transitions from paper-based to digital filing systems. The extension of MTD for VAT to all VAT-registered businesses by April 2022 expanded the market significantly, compelling developers like Intuit and Sage to integrate MTD functionalities into their platforms. This shift not only increased subscription revenue but also solidified market confidence in digital solutions as both individuals and businesses sought cost-effective, reliable alternatives to traditional accounting services. Industry revenue is expected to grow at a compound annual rate of 3.8% over the five years through 2024-25 to reach £200.1 million. The provision of online software has greatly boosted industry revenue, as it helps developers reach a wider audience and makes the sale of software cheaper and more convenient. Economic factors, like the cost-of-living crisis, have influenced consumer behaviour, with many turning to digital platforms for their tax preparation needs to save costs over the three years through 2024-25. Moreover, lower consumer and business confidence constrained spending, heightening demand for industry software, as some uncertain consumers and businesses prefer to file tax returns themselves using cheaper software instead of acquiring tax consultants' services. Revenue is set to climb by 5.1% in 2024-25, supported by strong uptake of online software and a higher number of UK businesses. The average industry profit margin is forecast to heighten over the five years through 2024-25, supported by the provision of software online, which has reduced costs and supported sales growth. Industry revenue is forecast to strengthen at a compound annual rate of 5.6% over the five years through 2029-30 to reach £262.9 million, with amended MTD requirements and the popularity of online software expected to boost demand. The government's commitment to digital tax administration, with MTD extensions for Income Tax Self Assessment set for 2026, promises to expand the market further. Developers that align with these legislative changes and innovate accordingly are poised to capitalise on new opportunities. The industry's progression towards cloud-based solutions, like Sage's successful integration of AI technologies, underscores the competitive edge that advanced digital solutions offer. However, the industry faces challenges, primarily a skilled workforce shortage. Developers must invest in upskilling and reskilling initiatives to maintain their competitive edge. Strategic measures, coupled with emerging technologies, will be vital for sustaining growth in the complex landscape tax preparation software developers navigate.

The VAT factsheet provides information on VAT receipts, Home VAT and Import VAT. Home VAT declared on traders returns classified by sector and trade group. VAT registrations, deregistrations and trader population. It also contains a historic series of annual and quarterly VAT receipts and VAT registrations and deregistrations. Source agency: HM Revenue and Customs Designation: Official Statistics not designated as National Statistics Language: English Alternative title: Value Added Tax factsheet

Bulletins provide a full historic series of data detailing amounts of goods cleared and amount of duty collected. Source agency: HM Revenue and Customs Designation: National Statistics Language: English Alternative title: Indirect Tax