The UK’s financial sector contributed record tax receipts to the Treasury last year, underlining the sector’s importance to the wider economy.
According to research conducted by PwC, financial services firms contributed over £110bn in taxes last year, making up 12.3 per cent of total tax receipts. This means it could pay for the entire education budget.
Looking back to 2016, the financial sector’s tax contribution has increased by £23.3bn.
“Financial and related professional services are a significant and consistent source of tax revenue for the government,” Miles Celic, chief executive at TheCityUK, said.
“It is critical that the government prioritises creating a tax environment that is stable, predictable, and competitive to maintain and strengthen the UK’s position as a world class destination for investment and business growth.”
The research showed that financial services firms paid £18.4bn in corporation tax, making the sector the largest contributor to UK corporation tax receipts. Professional services firms – including accountancies and consultancies – contributed £6bn.
The bulk of the tax take came from employment taxes, like income tax and national insurance. 14 per cent of all employment taxes came from people employed by financial services firms.
The average tax paid per employee in the industry was estimated to be around £30,500, significantly higher than the national average of £11,866. TheCityUK said this shows the industry’s “vital role in providing high-skill, high-wage jobs”.
Financial and related professional services are a significant and consistent source of tax revenue for the government
Miles Celic, TheCityUK
Chris Hayward, policy chairman at the City of London Corporation, said: “These latest figures showcase, once again, how the UK financial and professional services sector is an engine for growth. It’s vital that we continue to support the sector.
“The UK needs a robust and interconnected financial and professional services strategy that will bring public and private sectors together to enact a bold global ambition, provide clarity to business and drive economic growth across the UK.”
The research comes shortly after a new survey from EY showed that the UK pulled ahead of European rivals to be the continent’s undisputed financial hub.
The UK is now home to a third of all European FDI projects focused on financial services, up from 26 per cent in 2022. France and Germany are tied in second place at 12 per cent each.