New data from HMRC shows how much the government relies on just four taxes.
The Labour Party went into the 2024 general election with pledges on four major taxes in its manifesto:
- “Labour will not increase taxes on working people, which is why we will not increase National Insurance, the basic, higher, or additional rates of Income Tax, or VAT.”
- “Labour will cap corporation tax at the current level of 25 per cent, the lowest in the G7, for the entire parliament…”
Initially, these tax commitments were perceived as politically essential to counter claims that a Keir Starmer administration would implement tax-and-spend policies. However, the quadruple tax lock faced significant criticism from numerous economists for the five-year limitation it imposed on the Chancellor during uncertain times.
Fast forward approximately two years since the manifesto’s release, and the economists’ concerns have been validated. Recent data from HMRC, released at the end of April, revealed that in the previous tax year, income tax, national insurance (NI), VAT, and corporation tax constituted 86% of all tax revenues. This is not surprising; over the last decade, these four taxes have accounted for more than £4 out of every £5 collected in taxes.
Despite the manifesto’s assurances, income tax revenues increased by 9% in 2025/26 compared to the prior year—outpacing both inflation and the growth of the UK economy. This increase is attributed to the freezing of the personal allowance and tax thresholds, which has pulled more individuals into the tax system and pushed existing taxpayers into higher tax brackets.
NI revenues surged even more significantly, rising by 16.3% due to changes to the level of employer’s NI contributions that contradicted the manifesto. Together, NI and income tax—the two taxes levied on earnings—accounted for 56.5% of all funds received by HMRC.
The increases in taxes on earnings stand in contrast to the growth of VAT, the third-largest source of tax revenue, which rose by 5.7%. Corporation tax experienced even slower growth at 4.6%, potentially due to employers claiming more tax relief on the increased NI contributions.
The dominance of the big four manifesto-locked taxes explains why the Chancellor has made so many tweaks to the overall system to raise additional revenue. Be prepared: it is beginning to look like that process will be repeated at the next Budget.
For HMRC’s latest bulletin on tax receipts and NI contributions, visit here, or speak to our tax consultancy team.