Millions of UK workers are set to pay an additional £17 billion in income tax and national insurance contributions by the end of the decade due to frozen tax thresholds, according to figures from the Office for Budget Responsibility (OBR).
This increase in the tax burden, described as a 'stealth raid' by critics, was not explicitly detailed by Chancellor John Healey in his recent Budget. The OBR identified the freezing of personal tax thresholds from 2022-23 to 2030-31 as the primary driver behind the projected rise in tax revenues.
As wages increase, more individuals will fall into higher tax brackets because the point at which these rates begin has not been adjusted. The OBR warned that this measure could also disincentivize work, potentially leading to a reduction of 215,000 in the equivalent full-time workforce by 2030-31.
In addition to income tax changes, rates on income from property and savings are slated to increase by two percentage points from April next year. This follows a similar increase implemented by the previous government's Chancellor, Rachel Reeves.
The UK's overall tax burden, measured as a proportion of the national economy's value, was already projected to reach record levels. The OBR now forecasts it to climb sharply from 36% of GDP in 2025/26 to a new peak of 38.6% of GDP in 2031/32. This represents a significant increase from the pre-pandemic figure of 32.9% in 2019/20 and is the highest recorded level since 1948.