The official gap between the amount tax owed and what the government collects, has grown to £36 billion, new HMRC figures show.
The “Tax Gap” difference between the amount of tax that should be collected and the amount actually collected, grew from £30.8 billion in 2020/21 to 35.8bn in 2021/22.
At the same time £1.5 billion went uncollected from wealthy people subject to self-assessment.
Tax Justice UK Head of Advocacy and Policy, Rachael Henry, said: “The tax gap remains large and it’s worrying to see the amount of money uncollected from wealthy people continue to rise.
“At a time when public services are on their knees it’s vital we are collecting all the tax revenue we can. HMRC inspectors are worth their weight in gold and the government needs to give HMRC the resources it needs to collect these outstanding tax revenues.”
Inheritance tax is a tricky subject that stirs up a range of emotions. In part this is because it is paid by families who have just lost a loved one.
It also whips up feelings that get to the heart of what wealth and work mean to people. Successive governments have told families that they must be self-reliant and look to their own resources, not the state’s.
For many families, this means that wealth and inheritance are synonymous with financial security. Security against having no pension, or the costs of social care.
It’s no surprise that inheritance tax elicits strong feelings. But despite scare stories in the newspapers suggesting that the tax is deeply disliked, the reality is much more mixed.
That’s the key finding from a fascinating piece of research by our friends at the think tank Demos. They surveyed 2,000 Brits and found that up to three quarters backed some form of inheritance tax. Just 21% of people said all inheritances should be tax free.
We support inheritance tax
According to the research, there are high levels of support for charging inheritance tax on the super-rich, second homes and financial assets.
This is good news, especially given that elements of the media and right wing politicians have declared they want to get rid of the tax ahead of the next general election.
We support maintaining inheritance tax for many reasons (though we do accept that it needs reform). Below are 5 facts about inheritance tax that inform our view:
1. Most families don’t have to pay it
Just 3.8% of estates pay any inheritance tax. A generous system of allowances means that no inheritance tax is paid below a certain level of wealth. For example, a married couple can hand over a million pound family home to their children and grandchildren tax free.
2. The super-rich already benefit from inheritance tax loopholes, scrapping the tax would make them richer.
Tax Justice UK research exposed how a small number of multi-millionaire families benefit from tax loopholes to pay lower rates of inheritance tax than families who are less wealthy. Scrapping the tax entirely would make those multimillionaire families even better off.
We think this is wrong. At a time when services like the NHS are on their knees we should be scrapping giveaways to the wealthy, not giving more money away to them.
3. Scrapping inheritance tax would leave a £7 billion gap in our public services.
When you ask ordinary people if they support tax cuts even if it means cuts to public services, the answer is a clear: “No”.
Inheritance tax is one of the few taxes on wealth we have that helps pay for things like social care, the NHS and education. When politicians call for IHT to be scrapped, we should be asking them which care homes they’re prepared to close, how many nurses they are prepared to sack and how many schools they are willing to close to fill the £7 billion hole it would create.
4. Wealth inequality is a ticking time bomb for inequality, scrapping inheritance tax will make it worse
Research by the Institute for Fiscal Studies has highlighted the effect of growing inheritances in deepening the UK’s stubbornly entrenched wealth inequality. The Resolution Foundation argues that we will reach ‘peak inheritance’ by 2046, when the value of inheritances is expected to be more than two-fold that today. This will further entrench inequality within younger generations, between those that have parents who own homes and those that do not.
Birthright should not be the primary arbiter of wealth.
5. We need to fix inheritance tax, not scrap it
Inheritance tax needs fixing. One way of reforming it would be to change the focus so that it is paid by the person receiving a transfer of wealth. The Institute of Public Policy Research think tank has suggested that everyone should be able to receive £125,000 tax free over their lifetime. Only once this level is reached would someone start to pay tax on transfers. A lifetime receipts tax like this would be much fairer than the status quo.
We are clear that inheritance tax should be kept in some form. However, as Demos’ research hints, that will require reasoned, honest dialogue with the public about how the tax works and what it pays for.
That starts with leadership and a willingness by politicians to stand up for the positive role that tax plays.
The answer may surprise you. Despite making a £222 million profit, Amazon's main UK division paid no corporation tax in 2022.
Because of government tax breaks, this is the second year in a row that this part of Amazon has paid no corporation tax here.
In fact the UK government actually gave Amazon money last year: £7.7m in tax credits for making investments in infrastructure, which they likely would have made anyway.
This would be an appalling situation at any time – but during a cost of living crisis when our public services are crying out for better funding, it’s an outrage.
That’s why we’re taking action.
We’ve teamed up with 38 Degrees to demand the government scraps tax breaks for Amazon – and other huge corporations.
They must close tax loopholes and stop handing out subsidies to tech giants that don't need them. Sign the petition:
Stop tax breaks for Amazon
Summing up the dire situation, Paul Monaghan chief executive of our ally the Fair Tax Foundation told The Guardian:
“Amazon UK Services is not only not paying tax, but is being handed tax credits for investment that almost certainly would have happened anyway. Tax credits for old rope, if you will.
Amazon workers strike
At the same time Amazon is resisting giving it's staff proper cost-of-living wage increases.
Amazon workers in Coventry are currently on strike, demanding their wages increase from £11 to £15 an hour.
Amazon workers in other locations are currently balloting to strike.
Big multinational corporations like Amazon must be made to contribute to the UK through taxes – and paying their workers properly.
They must not be given a free ride by the UK government.
We’d raise £22 billion a year if we taxed the assets of the UK’s 350 richest families at 2%.
It’s a proposal we pushed in the media this week after the Times Rich List revealed the wealth of the super rich continues growing.
We worked jointly with the New Economics Foundation and the Economic Change Unit to do the research.
The £22 billion that could be raised would be enough to fund the construction of 145,000 new affordable homes a year. Or pay the wages of nearly a third of NHS staff.
The Guardian and Mirror both covered the research, running supportive articles on our case for taxing the UK’s richest families more
Our Executive Director Robert Palmer was on BBC News arguing that evidence shows super rich people don’t tend to emigrate if you tax them more.
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