HMRC’s latest provisional tax receipt figures for 2025/26 highlight a familiar pattern in the UK tax system: a small number of major taxes continue to generate the majority of government revenue.
Income Tax, National Insurance contributions, VAT and Corporation Tax remain the four biggest sources of HMRC tax receipts. Together, they account for around 85% of the total collected by HMRC, underlining how heavily the UK tax system relies on employment income, business profits and consumer spending.
For business owners, employers and individuals, the figures are a useful reminder of how tax policy affects payroll costs, personal tax bills, VAT cash flow and company profits.
The wider tax background
During the 2024 general election campaign, the Labour Party committed not to increase the main rates of Income Tax, National Insurance or VAT. It also said Corporation Tax would remain capped at 25% for the duration of the parliament.
Since then, the pressure on public finances has remained significant. While the headline rates of some major taxes have not changed, the increase in employer National Insurance costs has had a clear impact on HMRC receipts.
The 2025/26 figures show how difficult it can be for any government to raise large sums without changing one of the main revenue-generating taxes.
Income Tax remains the largest source of HMRC receipts
Income Tax receipts reached approximately £330bn in 2025/26. This represented around 35.2% of total HMRC receipts and was one of the highest shares seen over the last 20 years.
Receipts were around 9% higher than the previous year. A major reason for this is the effect of earnings growth combined with frozen personal allowances and tax bands. When wages rise but tax thresholds do not increase in line with them, more income becomes taxable or moves into higher bands. This is often referred to as fiscal drag.
PAYE continued to dominate Income Tax collection, with around 84.3% of Income Tax collected through the PAYE system. This reinforces the importance of accurate payroll reporting and real-time submissions for employers.
National Insurance receipts increased sharply
National Insurance contributions also rose significantly in 2025/26, particularly because of changes to employer National Insurance.
Employer Class 1 National Insurance receipts increased by around 24% to approximately £143.9bn. Total National Insurance receipts grew by around 16.3%.
When Income Tax and National Insurance are considered together, they represented around 56.5% of all HMRC tax receipts in 2025/26. This shows how central employment income and payroll taxes are to the overall UK tax base.
For employers, the rise in employer National Insurance has increased the cost of employing staff. This makes payroll planning, salary reviews, benefits planning and workforce budgeting more important than ever.
VAT receipts continued to rise
VAT receipts increased by around 5.7% to approximately £180.7bn.
The increase was more modest than the growth in Income Tax and National Insurance. Unlike Income Tax, VAT does not benefit from frozen personal allowances or tax bands in the same way. VAT receipts are more directly linked to consumer spending, prices and the VAT treatment of goods and services.
For VAT-registered businesses, this highlights the need to manage VAT carefully, especially where cash flow is tight. Late VAT payments, incorrect VAT treatment or poor record-keeping can quickly create problems with HMRC.
Corporation Tax receipts grew more slowly
Corporation Tax receipts rose by around 4.6% to approximately £95.1bn.
This was a more modest increase compared with Income Tax and National Insurance. One reason may be the continuing impact of full expensing, which allows qualifying businesses to deduct certain capital expenditure from taxable profits. Higher employer National Insurance costs may also reduce taxable profits because those costs are generally deductible for Corporation Tax purposes.
For limited companies, the figures show why profit forecasting and tax planning remain important. Directors should regularly review expected profits, allowable expenses, investment plans and Corporation Tax payment dates.
Other taxes made up a smaller share
All other taxes accounted for approximately £132.3bn, or around 14.1% of total HMRC receipts. This was the smallest proportion recorded over the last 20 years.
One notable increase came from Capital Gains Tax, where receipts reached around £22.2bn, approximately 62% higher than in 2024/25.
It is important to remember that HMRC receipts are recorded when tax is paid, not necessarily when the underlying transaction takes place. Many 2025/26 Capital Gains Tax receipts relate to gains realised in 2024/25. Some taxpayers may have brought forward disposals ahead of potential tax changes around the general election and Autumn Budget period.
Why the big four taxes matter
The dominance of Income Tax, National Insurance, VAT and Corporation Tax creates a challenge for policymakers.
If the government avoids increasing the headline rates of the largest taxes, it may need to rely on more targeted or complex measures. One example is the High Value Council Tax Surcharge, which is expected to apply to residential properties in England worth more than £2m from April 2028.
Although such measures can be politically significant, they are expected to raise far less than even small changes to the largest taxes.
What this means for UK businesses
For businesses, the latest HMRC figures point to several practical considerations:
Payroll costs need close attention. Employer National Insurance is now a bigger cost for many businesses, particularly those with larger teams or lower-margin operations.
Tax thresholds matter. Frozen allowances and bands can increase personal tax bills over time, even where headline tax rates do not change.
VAT cash flow should be monitored. VAT remains one of the largest tax receipts for HMRC, and businesses must ensure they are charging, reporting and paying VAT correctly.
Company tax planning remains important. Corporation Tax liabilities can be affected by investment decisions, allowable expenses, financing costs and the timing of profits.
Capital gains planning should not be left until the last minute. The sharp rise in Capital Gains Tax receipts shows how taxpayer behavior can change when future tax rules are uncertain.
How Accounting People Ltd can help
At Accounting People Ltd, we help UK businesses, directors, landlords, sole traders and individuals understand their tax responsibilities and plan with confidence.
Whether you need support with payroll, VAT, Corporation Tax, Self Assessment or wider business tax planning, our team can help you stay compliant while making informed financial decisions.
Tax rules and HMRC reporting requirements continue to evolve. Getting the right advice early can help you avoid unnecessary errors, manage cash flow and prepare for upcoming tax liabilities.
Need help understanding how the latest tax changes could affect your business? Contact Accounting People Ltd for practical, professional accounting and tax support
