The Government borrowed £14.6bn more than expected last year as non-doms fled Britain, undermining tax receipts and blowing a hole in Rachel Reeves’s plans.
Capital gains tax, charged on the profits made on the sale of assets, brought in £11.2bn in the first three months of 2025, down from more than £13bn in the same period a year ago, the Office for National Statistics said.
Self-assessed income tax revenues also came in lower than the Office for Budget Responsibility anticipated.
Weak growth in bonuses in financial services also hit growth in pay-as-you-earn income taxes and national insurance. In total, government revenues for last year came in £7.8bn below forecasts, the OBR said.
Alongside surging spending on benefits, public sector pay and debt interest payments, it meant the Treasury borrowed £151.9bn in the financial year ending last month, £20.7bn more than in the previous 12 months and £14.6bn more than the OBR predicted just last month.
Andrew Griffith, shadow business secretary, said the weak tax receipts are a direct result of the Chancellor’s record-breaking £40bn of tax increases in her October Budget.
“If you set out with a vengeance to destroy incentives to work and chase wealth creators overseas, it should be no surprise when tax revenues fall short and borrowing surges,” he said.
“A sensible Chancellor would change course urgently. But I am not sure we have one of those.”
Maxwell Marlow at the Adam Smith Institute, said it indicates the Government is driving the global rich out of the country, and so losing the taxes they would have paid on UK shores.
“The OBR’s correction that Capital Gains and Self-Assessed Income Tax receipts are £1bn below estimates is highly concerning, and could be linked to the departure of thousands of high net worth non-doms,” he said.
“By killing the golden goose with these tax reforms, the Government has chased away wealth creators, and thus brought in less tax revenue than they anticipated. ASI modelling shows that, by 2035, the British economy could be £14bn worse off every year, than if the government did not abolish the status.
“It is imperative that the Treasury rapidly amend its offering to high net worth individuals, and attract more private investment to the UK.”
Corporation tax revenues have been put at risk from an economic slowdown which has hit just as the Government pushed ahead with its latest increase in the minimum wage, an economist has said.
The economy has grown more weakly than expected, with business confidence shattered by the £25bn raid on employers’ National Insurance Contributions, which kicked in this month, and so is not included in the public sector borrowing figures published by the ONS.
Julian Jessop, fellow at the Institute of Economic Affairs, said this, and the increase in the minimum wage, is slowing growth, squeezing company profits and so harming corporation tax revenues.
“The economy has been weaker, and the anticipation of the cost increases in April have already been hitting profits and therefore returns on capital,” he said.
“The flip side of NICs going up is that companies are paying more in National Insurance, potentially, but less in other taxes.”
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