Where does the government get its money?
The Government raises around £1 trillion in revenue each year. Most comes from the three biggest taxes: income tax, NICs and VAT.
Most UK government revenue is from tax
In 2023–24, total UK government revenue is forecast to be £1.06 trillion, or 41% of gross domestic productGross domestic product (GDP) is a measure of an economy’s size. It is the monetary value of all market production in a particular area (usually a country) in a given period (usually a year).Read more (GDPGross domestic product (GDP) is a measure of an economy’s size. It is the monetary value of all market production in a particular area (usually a country) in a given period (usually a year).Read more). The primary source of revenue is taxation, which is forecast to raise £950 billion in 2023–24, or 37% of GDPGross domestic product (GDP) is a measure of an economy’s size. It is the monetary value of all market production in a particular area (usually a country) in a given period (usually a year).Read more – equivalent to around £17,200 for each adult living in the UK.
A little over £100 billion of government revenue is not accounted for by taxation. Non-tax revenues include, among other things, income received by government from public corporations (for example, from local authority housing) and interest payments on government assets (such as student loans).
Most tax revenue is from income tax, NICs & VAT
The pie charts above show the composition of revenue. The taxes in each category can be seen in the table below.
As shown by the chart, around two-thirds of tax revenue comes from just three taxes: income tax, National Insurance contributions (NICs) and value added tax (VAT). The dominance of these three taxes is a feature shared with most developed economies.
The next largest category of tax in the UK is taxes on companies, of which by far the most important is corporation tax, levied on company profits.
Alongside VAT, there are a number of other indirect taxes that are levied on spending, including excise duties and environmental taxes. As shown in the table below, the biggest revenue raiser among these is fuel duties.