Publication of Report on the Taxation of UK Family Businesses
30th October 2023
Family businesses generated more than a quarter of the UK tax bill in 2021, new research can reveal.
The research published today by the Family Business Research Foundation and PwC UK reveals how much the UK’s family businesses are contributing in tax receipts. This is the first report of its kind, exploring in depth the tax contribution of family firms and analysing the breakdown of all taxes contributed.
In 2021, the family business sector as a whole is estimated to have contributed £225 billion to UK public finances. This represents 27% of government receipts from all taxes in the UK. Out of this £225bn, £74bn was contributed in taxes borne - those that are a direct cost to the company - and £151bn in taxes collected, such as income tax and employee National Insurance Contributions (NICs).
For every £100 of turnover, family businesses in the study contributed an average of £18.50 in taxes.
As part of the research, the tax contributions of 44 firms were analysed. The research found that the largest proportion of taxes generated were people taxes (43%). Products taxes were next highest (37%), followed by profit taxes (12%), property taxes (6%) and planet taxes (2%).
The greatest contribution to the Exchequer from study participants is through employment taxes, 43% of the Total Tax Contribution. Corporation tax accounted for 10% of the tax contributed by study participants.
In the UK, family firms employ around 14 million people. For every person employed by the companies that took part in the study, £11,468 was generated in employment taxes. The largest element of value distributed by family firms in the study was to employees in wages (41%), followed by amounts generated in taxes (34%) showing the valuable contribution made by family firms through employment and to the Exchequer.
Sir Michael Bibby, Chairman, Family Business Research Foundation, said:
“We are pleased to be able to share this new study, which marks a step forward in producing more robust evidence on the overall economic impact of the UK’s family businesses. This report presents new evidence on the contribution that the family-business sector makes to the UK’s public finances– to the tune of £225bn in 2021.”
“For the first time, through this research, we can see a full breakdown of the taxes being generated by family firms. This not only highlights their enormous contribution but will also help policymakers model the impact of any changes they propose in the future for the family business sector.”
“Employment in family firms and the generation of employment taxes are important ways they contribute to the economy – as our previous research shows, family firms employ around 14 million people in the UK. It is also interesting to note the comparatively higher value distributed to employees by family firms.”
Andy Wiggins, Partner and Tax Transparency Lead at, PwC UK, said:
“This is the first time we’ve prepared a Total Tax Contribution report for the Family Business sector.”
Alongside the incredible impact Family Businesses have on the public finances, one of the key messages coming out of the report is the importance of investing in employees. Family Businesses are taking advantage of the apprenticeship levy, which demonstrates the importance family leaders put on developing careers and supporting local communities.”
Fiona Graham, Director of External Affairs and Policy, Family Business UK, said:
“Family businesses are the backbone of the UK economy and the bedrock of our communities. While we can see the positive impact they have in communities up and down the country, this is the first time we have had a detailed breakdown of the contribution made to our public finances.
We’re pleased to see this report published today to further build on the evidence of the important economic contribution family firms make to our country. And we hope that politicians and policymakers will study the report, and ensure they consider the cumulative impact of policy changes rather than looking at each tax policy in isolation.”