The UK financial services sector handed over £75.5bn in taxes last year, a shade more than the previous year’s record total, but corporation tax receipts have declined for the first time in five years, according to a report published by the City of London Corporation
Based on research by PwC, the report shows UK banks and financial institutions are responsible for 10.5% of all UK tax receipts. The total contribution in the year to 31 March 2019, comprising £33.4bn of taxes borne and £42.1bn of taxes collected, was broadly stable compared to the £75bn total for the year before.
However, corporation tax receipts have fallen for the first time since 2014 as a result of profitability of participating companies declining in this year’s survey.
Employment taxes have always made up the largest share of the sector’s tax contribution and this has not changed this year. Financial services firms employ 1.1m people across the country accounting for around 3% of all UK employment, generating 7.1% of GVA and 11.6% of all UK employment taxes (£34.5bn).
The report highlights the different tax profiles in each financial services sub-sector. For challenger banks, corporation tax made up 34% of their total tax contribution, compared with 15% across the banking sector as a whole. However, partly due to their smaller employment base, challenger banks’ share of contribution from employment tax was 37% – lower than the banking sector average at 50%.
Tax receipts from banks were found to be more dependent on where their employees and business operations are located, while insurers generate a higher proportion of taxes based on the location of their customers.
Andrew Kail, head of financial services at PwC, said: ‘This report highlights the resilience of the financial services sector. Contributing more than one pound in every ten of total UK tax receipts, despite ongoing uncertainty, is a major achievement.
‘A slipstream is being created across the sector due to technological advances; incumbents and challengers are disrupting the market, adapting to meet customer demand.
‘New ways of working, operational business models, and technological disruption have the potential to change the employment profile – and therefore the tax profile – of firms across the sector.
‘It’s important that we look closely at our tax system to ensure it’s fit for new ways of working and doing business while optimising the competitiveness of the sector post-Brexit.’