Legal and accountancy firms contributed enough to the exchequer last year to fund the legal aid budget 11 times over, according to figures published today. Lobby group TheCityUK said the two professional services sectors generated £19.1bn in tax in 2018, up 6.8% from 2016.

The £19.1bn figure can be expected to feature strongly in any debate about a levy on profitable City practices to fill the gaps left by cuts in the legal aid budget, currently £1.7bn a year. 

According to TheCityUK legal services and accountancy provide 2.8% of total UK tax receipts. For every £100 of turnover, legal and accounting firms contribute £38.40 in taxes. The figure includes partner taxes, corporation tax, employers’ national insurance contributions, irrecoverable VAT and business rates as well as VAT charged to customers.

Office block

Source: Michael Cross

In ‘Total tax contribution study for UK legal and accounting activities,’ TheCityUK report that the two sectors’ overall growth has outpaced wider UK economic growth in every year since 2010, with legal and accounting gross value added (GVA) growing by 58% compared with 35% for wider GVA. 

With an eye to the headlines generated by high payouts to partners and newly qualified lawyers, TheCityUK maintains that the government is the largest beneficiary of the value distributed by the two sectors. It takes 49.4% of this value in the form of taxes borne or collected. The next largest beneficiaries were employees, taking 30.5% of total value distributed, followed by partners who collected 20.1% after partner taxes.

Anjalika Bardalai, chief economist at TheCityUK, said: 'Legal and accounting firms are a key part of the UK’s world-leading financial and related professional services ecosystem. They also make a substantial contribution in the form of high-quality jobs, and from taxes which help to pay for the public services which make the UK an attractive place to live and work.'