£1.1 trillion of tax. What happens next?

Before the Chancellor stands up on 28 October, it is worth looking at how much tax the UK is already collecting.

In 2020/21, HMRC collected £608.8 billion.

By 2025/26, that had risen to £966.4 billion.

Look more widely and total public-sector receipts are around £1.1 trillion, against an economy of roughly £3 trillion.

That is a lot of tax.

So, rather than trying to guess every Budget announcement, perhaps the more useful question is:

Where can the government realistically go next?

Start with the big three

Most tax revenue does not come from Capital Gains Tax, Inheritance Tax or some new wealth tax.

It comes from Income Tax, National Insurance and VAT.

In 2024/25 those three alone produced around £657 billion, roughly three quarters of HMRC revenues.

And therein lies the problem.

The government has committed not to increase the main rates of Income Tax, National Insurance or VAT.

If the really big levers are politically constrained, attention naturally turns elsewhere.

Pensions. Capital Gains Tax. Property. Allowances. Reliefs.

That doesn’t mean they will change. It tells us where the pressure is likely to be.

Of course, you don’t actually need to put tax rates up

You can leave allowances and thresholds where they are.

The Personal Allowance remains £12,570 and starts disappearing once income exceeds £100,000. Between £100,000 and £125,140, that creates an effective 60% marginal Income Tax rate.

At some point, people notice.

There is a fairly simple economic principle here. If someone starts losing more than half of their next pound of income in tax, incentives and behaviour become part of the conversation.

Do I work more? Invest more? Take more risk? Build the business? Or not bother?

That matters if economic growth is the objective.

Will we have another pension tax-free cash panic?

We hope not.

Under today’s rules, you can normally take up to 25% of a pension tax-free, subject to a standard maximum of £268,275.

Before previous Budgets, rumours that this might change prompted some people to take pension money earlier than they otherwise would have done.

Once money has come out of a pension, you cannot necessarily put everything neatly back again.

Blick Rothenberg made an interesting point in its recent pre-Budget briefing: if the government does not intend to alter pension tax-free cash, some early guidance would prevent weeks of unnecessary speculation and rushed decisions.

We think that would be sensible.

Whether we get it is another matter.

And where has all the extra tax gone?

The rise from £609 billion to £966 billion sounds enormous – because it is.

But it isn’t £350 billion sitting unused in a Treasury bank account.

2020/21 was distorted by the pandemic. Inflation has subsequently increased both tax receipts and the cost of government.

In 2025/26, spending on social protection was £338 billion, Health departmental spending was £217 billion, and central-government debt interest alone was nearly £97 billion.

So the debate isn’t simply about whether government can raise more tax.

It is about how much tax an economy can carry while still encouraging people to work, save, invest and build businesses.

That is part of the social contract.

We pay tax to fund the country. In return, people need to believe that effort, investment and sensible long-term financial decisions remain worthwhile.

So what are we doing?

We are not going to pretend we know exactly what will be announced on 28 October.

Nobody does.

But there is a difference between predicting and being prepared.

We know the government needs revenue. We know the largest taxes are constrained by previous commitments. We know fiscal drag is already raising more money. And we know pensions, investments, Capital Gains Tax and Inheritance Tax remain important areas of financial planning.

Our job is to watch those pressure points and make sure your plan can cope with more than one outcome.

That is rather more useful than guessing the Budget correctly.