Tax burden on track to hit post war high of 37.7% in 2028-29, despite 2% national insurance cut

The tax burden in the UK is expected to reach a post-war high of 37.7% in 2028-29, despite a 2% cut in national insurance. The Office for Budget Responsibility (OBR) attributes this increase to fiscal drag, which will result in 4 million additional workers paying income tax and 3 million moving to a higher tax rate.

Breaking:

The tax burden is still on course to reach a post war high of 37.7% in 2028-29 even after the 2% cut in national insurance

The OBR says that this is driven by fiscal drag, which will see 4m additional workers paying income tax and 3m moving to higher rate pic.twitter.com/9fCN8TXRjd

— Steven Swinford (@Steven_Swinford) November 22, 2023

The tax burden in the UK is set to reach a post-war high of 37.7% in 2028-29, according to the Office for Budget Responsibility (OBR). This comes even after a 2% cut in national insurance. The OBR attributes this increase to fiscal drag, which will result in an additional 4 million workers paying income tax and 3 million moving to a higher tax bracket.

Fiscal drag occurs when tax thresholds are not adjusted in line with inflation, leading to more people being pushed into higher tax brackets as their incomes rise. In this case, the OBR predicts that as wages increase over time, more individuals will surpass the income tax threshold and be liable to pay taxes. Additionally, those already paying income tax will likely see their incomes rise, pushing them into higher tax brackets.

The implications of this are significant. As more people are subject to income tax and higher tax rates, the burden on individuals and families will increase. This means that individuals will have less disposable income to spend on goods and services, potentially impacting consumer spending and economic growth.

Furthermore, the increase in the tax burden may also have political implications. Higher taxes can be a contentious issue, and governments will need to carefully consider the impact of these changes on public sentiment and support.

It is worth noting that the projections provided by the OBR are based on current economic conditions and assumptions about future wage growth. Any changes to these factors could impact the accuracy of the OBR’s predictions.

Overall, the OBR’s forecast of a post-war high in the tax burden highlights the challenges facing the UK economy. As the country looks to recover from the economic impacts of the COVID-19 pandemic, policymakers will need to carefully consider the implications of increasing taxes on individuals and the broader economy..

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@Steven_Swinford said Breaking: The tax burden is still on course to reach a post war high of 37.7% in 2028-29 even after the 2% cut in national insurance The OBR says that this is driven by fiscal drag, which will see 4m additional workers paying income tax and 3m moving to higher rate