Guidance

How public spending was calculated in your tax summary

Updated 20 December 2024

1. Overview

In the Annual Tax Summary, the government makes available a clear and simple summary of how much income tax and national insurance individuals paid in the last financial year and how these payments were used in its spending.

Since 2020, the Annual Tax Summary has been accessible online through the GOV.UK Annual Tax Summary page or your Personal Tax Account. In general these are no longer printed and mailed to taxpayers, although customers can request a paper copy of the Annual Tax Summary from HM Revenue and Customs.

Government spending can be broken down and understood in different ways. This guide outlines how the public spending breakdown was calculated and shown in your tax summary and provides some general context on tax and spending.

You can also find out more about tax and spending from the statistics published by the Office for National Statistics (ONS) at the links below:

Public Sector Finances - October 2024

Public Sector Finances - supplementary table

According to the ONS statistics published in November 2024, in 2023/24 the government received a total of £282 billion in income taxes (PAYE and Self-Assessment) and £181 billion in National Insurance contributions. These taxes made up around 39% of the £1,098 billion total current receipts in 2023/24. Spending, known as total managed expenditure, in 2023/24 was £1,223 billion. The difference between these two numbers is public sector net borrowing (excluding public sector banks) – commonly known as the deficit. This was £125 billion in 2023/24.

Indirect taxes such as VAT have not been included in the summary, because HMRC do not hold data on individual consumer spending – which would be required to show the total amount of VAT that an individual has paid in a year.

2. How public spending was calculated in your annual tax summary

The illustrative breakdown of how your payments of Income Tax and National Insurance contributions is spent in your Tax Summary is largely based on Official Statistics published by the government in the Public Expenditure Statistical Analyses (PESA). PESA is the annual publication of information on public, or government, spending. PESA for 2023/24 can be found at the link below:

PESA 2024

PESA provides a range of information about public spending, largely based around two frameworks: ‘budgeting’, which provides information about central government departmental budgets, which are the aggregates the government uses to plan and control expenditure; and ‘expenditure on services’, which is based on National Accounts definitions and covers spending by the whole of the public sector. The tax summaries are based on the ‘expenditure on services’ framework, as it has a wider coverage and is more stable over time. The total ‘expenditure on services’ figure is normally lower than ‘Total managed expenditure’ (mentioned in the first section) because of the difficulty of attributing some types of spending to an appropriate function. One of the main differences is that it doesn’t include depreciation or reverse certain VAT refunds. More detail on spending frameworks can be seen in Annex E of the above PESA link.

Within ‘expenditure on services’, there are different ways to show spending by the public sector. For the tax summaries, the government chose to use a spending analysis based on ‘function’. An analysis based on function shows how the government spends money on a particular cross-cutting purpose or area and gives a truer picture of what is spent on a given area than is provided by departmental expenditure. In PESA, the different functional areas of spend are defined using the United Nations ‘Classification of the Functions of Government’ (UNCOFOG). This shows public spending against ten functions, which is then further divided into more detailed sub-functions. Further information about UNCOFOG can be found online here (within the link select ‘COFOG’ from the drop-down menu on the left-hand side):

UNCOFOG detailed structure and explanatory notes

3. How public spending is described in your annual tax summary

Public spending in the Annual Tax Summary is based on Table 5.2 in PESA, which, as described above, provides a functional analysis of public spending by the UK government in the financial year 2023/24. You can find the full table at the following link: PESA Table 5.2.

Where possible, the tax summary uses the same headings as PESA does, such as for defence or health. However, initial testing with taxpayers indicated that the summaries would be more useful if the data were presented using accessible and easily-understood labels. Some PESA categories are broadly defined and contain significant areas of expenditure that are often considered as discrete from one another, and so it has been necessary, in some instances, to break down the data into segments that are more easily accessible for taxpayers.

For instance, state pensions are a significant area of ‘social protection’, so they have been shown as a separate category. As the data for state pensions is not published separately in PESA for 2023/24, the state pension number is taken from the Office for Budget Responsibility’s Economic and Fiscal Outlook, March 2024 Table 4.7, found within the ‘detailed forecast tables: expenditure’ link. The remainder of ‘social protection’ has also been renamed ‘welfare’, in line with the consideration that terms should be accessible and easily understood by taxpayers. The Social protection category follows UN Statistics guidance (as outlined above) it therefore includes spending on items such as unemployment benefits, tax credits, public sector pensions and various benefits/support covering categories such ‘old age’, ‘sickness and disability’, ‘Housing’, ‘Family/Children’ and ‘personal social services’.

Further changes and the associated amounts published in PESA can be seen in the table below. These were again made in line with the consideration that terms should be accessible and easily understood by taxpayers.

PESA Public Expenditure Data for 2023-24 Tax Summary Headings

Tax summary description	Description of PESA source (See PESA Table 5.2)	Public Sector Expenditure (£bn)	%
Welfare	‘Social Protection’ excluding state pensions	236.3	21.6%
Health	Health	221.0	20.2%
State Pensions[footnote 1]	Within ‘Social Protection’	124.6	11.4%
National Debt Interest	Within General Public Services, but shown in more detail in table 5.2	121.1	11.1%
Education	Education	111.5	10.2%
Defence	Defence	56.8	5.2%
Public Order & Safety	Public Order & Safety	47.7	4.4%
Transport	Economic Affairs, without Business and Industry but shown in more detail in table 5.2	46.2	4.2%
Business & Industry	Economic Affairs, without Transport	45.6	4.2%
Government Administration	Captured under General Public Services, but shown in more detail in table 5.2, excludes the European Union Financial Settlement payments	22.8	2.1%
Housing and utilities (e.g. street lights)	Housing & Community Amenities	19.9	1.8%
Environment	Environment protection	15.3	1.4%
Culture (e.g. sports, libraries, museums)	Recreation, Culture & Religion	13.0	1.2%
Overseas Aid	Captured under General Public Services, but shown in more detail in table 5.2	7.2	0.7%
Outstanding payments to the EU [footnote 2]	EU Transactions total in 5.2 but includes the European Union Financial Settlement payments	6.5	0.6%

1. Figures for the Tax Summary were prepared before the publication of the OBR’s October 2024 economic and fiscal outlook (EFO). Therefore, State Pension figures quoted here are from OBR’s March 2024 EFO.
2. Prior to the UK’s withdrawal from the EU, this heading was formerly known as ‘UK Contributions to EU budget’. Following the Withdrawal Agreement, it now includes ‘Outstanding payments to the EU’ in 2023-24.