Businesses bear the brunt of nearly £1 trillion tax bill – Are they able to handle the extra costs?
If businesses feel as though they are paying more tax than ever, there is a reason for that.
HMRC have revealed the amount of tax collected in the 2025/2026 – an eyewatering £938.8 billion.
With this tax year likely to see the collected revenue cross £1 trillion, businesses need to be more careful than ever with managing costs to afford the extra burden.
Are businesses paying too much tax?
The large amount of tax collected has managed to exceed even the predictions of the treasury.
This is especially true of employer National Insurance Contributions (NICs), which were only predicted to add £24 billion to business tax bills but instead added £28 billion.
In revealing the amount that has been extracted from businesses, it may be vindicating for business owners who have warned that rising employee expenses were stifling their ability to run a successful company.
Rising wages are the main contributing factor in Income Tax and NICs, making up over half the collected tax at £552.8 billion.
VAT remains the second largest single source of tax revenue, at £180.7 billion, while Corporation Tax and other company taxes reached £101.4 billion.
Capital Gains Tax (CGT), most likely incurred from disposing of assets, rose 62 per cent, going from £13.68 billion to £22.18 billion.
It seems that, whatever business owners do, a hefty tax bill awaits them.
How can businesses manage increasing tax bills?
While the tax collected in the 2025/2026 tax year is impressive, there is a real chance that it will be much higher this year.
Wages have increased once more, meaning that employer and employee NICs will be higher as a result.
The National Living Wage (NLW) is now also high enough that over half a full-time worker’s annual salary will be taxable income for the first time.
Dividend tax rates have also increased and Business Asset Disposal Relief is less generous, meaning that the increase may be even more substantial than it was this year.
All of this is combined with increased operational costs that were already causing businesses concerns before the outbreak of conflict in the Middle East added additional pressures.
There is still little indication that the Government are going to heed the concerns of business owners and adjust economic plans to be more forgiving.
Following two Autumn Budgets that were viewed as overlooking SMEs, it has become more important for business owners to take control of their own finances where possible.
Getting advice from an expert accounting team can help you to keep rising costs under control and determine a more dynamic approach to your finances.
We can help review your current approach to tax to ensure that you are operating in a tax-efficient way while still being fully compliant.
The real question that hangs around discussions of steep tax collection is how the collected money will ultimately be spent.
If the Government are able to invest more in infrastructure and local areas, it may benefit businesses that depend on footfall for success.
However the Government spends its record tax takings, we will continue to support you in approaching your finances with confidence.
Speak to our team for expert support in managing your business’s finances.
