Royal Mail has been hammered by Labour's jobs tax and declining letter volumes.

Parent company International Distribution Services (IDS) said the UK business saw profits plunge to £96million in the year to the end of March from £198million over the previous 12 months.

The slump came as employee costs rose by 5.5 per cent, including a 4.2 per cent pay increase for frontline staff and a £133million hit from Rachel Reeves' national insurance tax raid.

The postal service is also grappling with declining letter volumes - down 10 per cent to 5.7billion last year - as people switch to digital communications and baulk at the soaring price of stamps.

But parcel volumes were up 7 per cent to 1.4billion.

The results came as Royal Mail found itself at the centre of a political row - with humourless Labour MPs condemning the company for a joke about Keir Starmer needing to redirect his post after quitting as Prime Minister.

The slump in profits at Royal Mail came despite a 2.6 per cent rise in revenues to £8.4billion.

And profits at wider IDS group fell by a fifth to £222million as the international GLS parcel arm was hit by regulatory changes in Italy and a challenging trading environment in Canada.

IDS – bought last year by Czech billionaire Daniel Kretinsky, who is set to become the biggest shareholder in West Ham United – said the decline in UK letter volumes reinforced the need to overhaul the universal service offered by Royal Mail.

Royal Mail is pressing ahead with the roll-out of changes nationwide that will see second class post delivered every other weekday, with the Saturday service being scrapped across the UK.

It comes after an agreement with trade unions, which had been holding up the extension of the changes across its full network of around 1,200 delivery offices.

Royal Mail is under increasing pressure to improve service levels, with regulator Ofcom launching an investigation earlier this month into the firm’s failure to meet its delivery targets over the past year.

Royal Mail revealed in May it had missed targets for another year running, achieving 75.7 per cent of first class mail arriving the next working day over the 12 months to the end of March and 90.2 per cent of second class mail delivered within three working days.

It was fined a record £21million by Ofcom in October last year for missing targets in 2024-25.

Martin Seidenberg, group chief executive at IDS, said: 'This has been a year of real progress for IDS on many fronts, as we invest to build a modern, global logistics business at scale.

'Following Royal Mail’s agreement with the unions we are rolling out universal service changes across the UK which will lead to a more efficient, reliable and sustainable service for our customers.

'GLS continues to grow revenue and parcel volumes despite challenging conditions in parts of Europe, underlining the resilience of the group and the strength of our international network.'

IDS said it is continuing to ramp up its network of parcel lockers to capitalise on booming ecommerce and marketplace sales, with out-of-home parcel volumes up 40 per cent over the year for Royal Mail.