The government raked in £438.6bn in tax between April and September, some £32.1bn more than the same period a year ago, according to data from HMRC, with Britons paying more across the board.
Income tax, capital gains tax (CGT) and National Insurance (NI) receipts for the period stood at £253.4bn, some £25.7bn higher than in 2024, while inheritance tax (IHT) rose to £4.4bn.
Rachael Griffin, tax and financial planning expert at Quilter, said income tax and NI “remain artificially inflated by the freeze to tax thresholds, which has steadily dragged more earners into higher tax bands as wages rise”.
“This doesn’t point to a roaring economy but a sign of a Treasury increasingly reliant on extracting more from the same taxpayers,” she warned.
Fiscal drag – where inflation pushes people into higher tax brackets – has been a dependable source of income for the government in recent years and could dissuade chancellor Rachel Reeves from increasing thresholds in her Budget next month.
“Reversing the freeze was positioned as a signature move in her first Budget but maintaining it would quietly preserve billions in extra tax revenue,” said Griffin.
Meanwhile, Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, expects inheritance tax to hit a new record high in 2025.
While relatively few estates pay the tax, suggestions that Reeves could bring pensions into the death tax calculation from 2027, among other tweaks, such as a cap on lifetime gifts, means it is an issue at the forefront of politics presently.
Morrissey said: “The likelihood is that we will see people look to get ahead of any changes and start making use of their allowances as they currently stand to gift money to loved ones while they can and potentially save them a tax bill.”
Away from taxes, the government borrowed £20.2bn in September, the highest for the month since the pandemic in 2020, taking the total borrowed so far this year above £100bn, 13% above last year and the second most since the outbreak of Covid.
Richard Carter, head of fixed interest research at Quilter Cheviot, said the economy is “in somewhat of a straitjacket” as “fiscal headroom is all but non-existent”.
“Labour is finding it is having to borrow to fund day-to-day activities and this comes with consequences. If Reeves and the Treasury are to bring borrowing down, a combination of tax rises and spending cuts are required,” he said.