The estimated overall spending on tax reliefs increased to a record £155bn in the last financial year (2017-18), according to Resolution Foundation analysis of the annual HMRC Principal Tax Relief Statistics published today (Tuesday).
Adam Corlett, Senior Economic Analyst at the Resolution Foundation, said:
“Spending on tax reliefs has grown to a record £155bn a year and is now bigger than the combined budgets of the health, transport, justice, home and foreign office departments.
“While many tax reliefs exist for good reasons, others are poorly directed and none are scrutinised properly. As a result their cost is growing without any proper consideration of whether they provide sufficient public benefit.
“On a day when the Cabinet is discussing NHS spending pressures, and when low and middle income households are having their living standards squeezed by ongoing benefit cuts, policy makers must scrutinise these tax reliefs more closely in case there are better ways to spend any of this £155bn.”
Notes to Editors
|Tax expenditures in 2017-18||£bn|
|Zero/reduced VAT on food, energy etc.||52|
|Exemption of main residences from CGT||28|
|Income tax relief for pension contributions||24|
|Lack of NICs on employer pension contributions||17|
|Lower NICs for the self-employed||4|
|Business rate reliefs (small businesses, charities etc.)||3|
|R&D tax credits||3|
|Income tax relief for ISAs||3|
|Entrepreneurs’ CGT relief||3|
|Inheritance tax breaks (housing, agriculture, business & charity)||2|
|NICs Employment allowance||2|
|Income tax relief for charities, e.g. Gift Aid||2|
|Other tax expenditures with known costs of £50m or above||9|
Note: Definition of tax expenditure based around NAO categories. Income tax relief for pensions is in part a deferral of tax
The estimated £155bn cost of tax reliefs in 2017/18 is equivalent to total departmental spending on health, transport, justice, the home office and FCO combined. It is also equivalent to the revenue raised by corporation tax, council tax, fuel duty, stamp duty land tax and business rates combined.