Exchequer returns July 2025 – Peter Vale commentary

The latest Exchequer figures for July will provide some comfort to the Government in advance of October’s Budget 2026 package, although growth in both income tax and VAT receipts has slowed.

After a slight dip in June income tax returns, there will be some concern that the figures for July followed a similar path, up only marginally on the same month last year.  With the economy remaining at close to full employment, it would indicate a stabilisation in salaries and wages.  

VAT figures remain healthy, running at 4.8% ahead year to date, although the July returns were slightly off earlier months.  It would indicate a slowdown in consumer spending, with sentiment likely not helped by the ongoing tariff negotiations.

July is typically not a big month for corporation tax receipts but the figures this month were unusually strong, approximately four times the amount collected in July 2024, albeit from a low base.

Year to date figures are also impressive, running at 14.1% ahead of 2024, after stripping out exceptional payments.

The exceptional July corporation tax figures further underline the volatility in corporation tax returns and our reliance on a small cohort of taxpayers.

Normally, we would expect any new tariffs, in particular pharma or semiconductor related, to adversely impact future corporation tax returns.  However with so much volatility in the numbers, it is incredibly difficult to predict the future trajectory of corporation tax receipts.

In this context, the potential impact of tariffs on the Budget 2026 package is equally difficult to call.  Of some benefit is that August corporation tax figures are generally significant and will give further indication of likely year end returns, but of note is that the critical post Budget month of November will be even more significant. 

Overall, another solid month for the Exchequer but plenty of uncertainty remains regarding the full year outturn.