Profits plunge at Royal Mail as tax raid adds to woes

By the Editorial Team · Wednesday, June 24, 2026

Royal Mail’s profits dropped sharply to £96 million for the year ending March, impacted by increased National Insurance costs and a 10% decline in letter volumes amid shifting customer habits. The company is responding with operational changes like reduced delivery days and calls for updating the universal service obligation, while facing regulatory scrutiny and pressure to improve service standards.

Royal Mail reported a significant decline in profits for the fiscal year ending in March, attributing the drop to a combination of increased taxation and falling letter volumes. Its parent company, International Distribution Services (IDS), announced that the UK postal business’s profits fell to £96 million, down from £198 million the previous year. The company took a £133 million charge linked to the National Insurance changes introduced by Chancellor Rachel Reeves, a move described by Royal Mail as a "jobs tax."

The decline in letter volumes remains a key challenge for Royal Mail, with a reported 10% decrease to 5.7 billion items in the past year. This trend is driven by customers shifting to digital communication methods as well as resistance to rising stamp prices. However, parcel volumes showed moderate growth, increasing by 7% to 1.4 billion during the same period.

Royal Mail is also facing ongoing scrutiny over service performance and recent operational changes. The company has begun implementing nationwide adjustments that include delivering second-class post every other weekday and eliminating Saturday deliveries, following an agreement reached with trade unions. These changes affect approximately 1,200 delivery offices and reflect efforts to address cost pressures amid evolving market conditions.

The universal service obligation at Royal Mail has come under further examination, with IDS emphasizing the need to update this framework in light of sustained volume declines. Meanwhile, the international segment of IDS, which includes the GLS parcel business, experienced a 20% drop in profitability to £222 million. This segment was impacted by tighter regulations in Italy and challenging market conditions in Canada.

Regulatory pressure has increased as well. In June, Ofcom opened an investigation into Royal Mail for failing to meet delivery standards over the past year. The company disclosed in May that it achieved 75.7% on-time delivery for first-class mail within the next working day and 90.2% for second-class mail within three working days for the year ending in March. This continues a pattern of underperformance, following a record £21 million fine imposed by Ofcom in October 2025 for missed targets during the previous year.

Royal Mail has also found itself embroiled in a political controversy after a company joke regarding former Labour leader Keir Starmer drew criticism from Labour MPs. The remarks were condemned amid a broader debate regarding the company’s public image and service challenges.

IDS’s ownership has shifted recently after it was acquired last year by Czech billionaire Daniel Kretinsky, who has expressed support for overhauling Royal Mail’s universal service amid these ongoing pressures.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.