The strong Income Tax receipts are driven primarily by self-employed tax returns in November, together with preliminary tax payments made for 2015. As well as reflecting a stronger domestic economy, factors such as higher rental income are also likely to be behind the figures. It is reasonable to assume that the strong receipts will be repeated next year.
Last month, we saw particularly strong Corporation Tax receipts, which was surprising given that October is normally a quiet month for Corporation Tax receipts. Today’s figures for November, a key payment month for Corporation Tax, are even more impressive. The figures are likely to reflect a number of factors, including stronger trading conditions. Foreign currency movements may also account for a large portion of the excess as a strong dollar in particular will result in stronger euro Corporation Tax receipts. It is also possible that groups are making top-up corporation tax payments, having underestimated their liability earlier in the year.
The VAT figures represent trading activity in September and October and reflect ongoing consumer confidence. We won’t see the key November/December figures until early February next year, which will be eagerly awaited. There has been a time lag between improved economic conditions and greater consumer spending. With interest rates remaining low and tax cuts kicking in, there is optimism that those spending patterns will continue.