The are several major taxes contributing to the revenues that flow into the economy of the United Kingdom. These are business rates, income tax, national insurance, excise duties, corporation tax, VAT (value added tax on buying luxury items) council tax, stamp duty and car tax. Other taxes include taxes paid on purchasing alcohol, fizzy drinks and fuel and the inheritance tax paid on private estates, after someone passes away. Income from state owned businesses is also an important source of income for Her Majesty’s Treasury which is “the government’s economic and finance ministry.”
The Institute for Fiscal Studies explains how income tax, National Insurance contributions (NICs) and VAT to make up two-thirds of the share of national income raised in taxes. (1) The Guardian newspaper commented on Philip Hammond’s budget forecast in November 2017 stating that the country’s “wealth, largely in bricks and mortar (is valued at) more than £8tn” or 8 trillion pounds. (2)
The service sector is a term used to describe work that is carried out but not involving manufacturing products or agricultural production. Services include retail and leisure, hotels, media and utilities companies. Financial services are primarily based in the City of London and these banking and investment businesses currently also contribute greatly to the revenue generated in the UK economy. “Services are the largest sector, accounting for more than 78 percent of the GDP. Manufacturing and production contribute 21 percent, and agriculture contributes a tiny 0.6 percent.” (3)
This year the Office for National Statistics reported that “The largest industry group is professional, scientific and technical, making up 17.5% of all registered businesses in the UK.” (4) The ONS also went onto say that approximately 1 in 5 of all businesses are based in London which is massively important as a UK centre for cultural and creative businesses, tourism, financial services and IT businesses and start-ups.
Historically the principle of keeping money in the bank was that you “had as much money as you had gold in the vault.” (4) Nowadays the money that is received from the service, manufacturing, tourism and other industries like private healthcare and educational companies is used to fund all kinds of public spending, welfare and infrastructure projects. According to HM Treasury the government aims to “Increase employment and productivity, and ensure strong growth and competitiveness across all regions of the UK” (5)
Maintaining commercial prosperity and attracting and keeping multinational companies based in the UK will be key after Brexit. Excellent employment options for UK workers will be vital to ensuring tax revenues are maintained. This is important to be able to achieve the government’s goals for the UK’s gross domestic product (GDP).
As technology advances the online tax system and financial automation can help to improve the efficiency of all the money that is entering the Treasury. If the economy can grow positively then people of all ages could all enjoy a 21st century standard of living. If there is enough money in the economy, it is possible in the near future, that everyone living on this wonderful island can enjoy a decent home, education, career and a comfortable retirement. That would be a legacy that would truly match the UK’s position as one of the top five most advanced economies in the world. (6)
(1) ‘Tax revenues: where does the money come from and what are the next govenrment’s challenges?” Helen Miller and Barra Roantree 1 May 2017 https://www.ifs.org.uk/publications/9178
(2) ‘Where does the UK government get its money, and what does it spend it all on?’ The Guardian, Phillip Inman, 22 Nov 2017 https://www.theguardian.com/uk-news/ng-interactive/2017/nov/22/where-does-the-uk-government-get-its-money-and-what-does-it-spend-it-all-on
(3) ‘How the UK Makes Money’ Vanessa Page, Investopedia 16 Oct 2018 https://www.investopedia.com/articles/investing/042915/how-uk-makes-money.asp#ixzz5U6fr6KA1
(4) ‘Where does money come from? The Bank of England explains all’ Management Today Andrew Saunders 18 Mar 2014 https://www.managementtoday.co.uk/does-money-from-bank-england-explains/article/1285731
(5) ‘About Us’ HM Treasury website 16 Oct 2018 https://www.gov.uk/government/organisations/hm-treasury/about
(6) ‘The world’s biggest economies in 2018’ Rob Smith, World Economic Forum, 18 Apr 2018 https://www.weforum.org/agenda/2018/04/the-worlds-biggest-economies-in-2018/
(7) Office for National Statistics, Activity, size and location 16 Oct 2018 https://www.ons.gov.uk/businessindustryandtrade/business/activitysizeandlocation