UK households facing with ‘historic’ tax rise after Spring Statement | Personal Finance | Finance

UK households face a “historic” tax rise after Chancellor Rachel Reeves delivered her Spring Statement to the House of Commons earlier today, a leading watchdog warned. The overall tax burden in the UK is forecast to increase from the equivalent of 35.3% of GDP (gross domestic product, or the total value of the economy) in 2024/25, to a “historic high” of 37.7% in 2027/28, according to the Office for Budget Responsibility (OBR).

This figure is more than four percentage points above the pre-pandemic level of 33.2% in 2019/20, although the peak of 37.7% is lower than previously forecast. The budget watchdog has now halved its forecast for growth in GDP in 2025 from 2% down to just 1%, with the OBR’s economic outlook indicating that the Chancellor would have missed her goal of balancing the nation’s books without action.

At the October budget last year, the OBR said the tax burden was likely to climb as high as 38.3% in 2027/28, saying personal taxes – “particularly income tax and national insurance contributions” – are the main driver of the increase in the tax burden. Beyond 2027/28, the figure is forecast to stabilise at 37.5% in both 2028/29 and 2029/30.

Reeves blamed “increased global uncertainty” as the OBR slashed its economic growth forecast, telling MPs: “I am not satisfied with these numbers. That is why we on this side of the house are serious about taking the action needed to grow our economy. Backing the builders, not the blockers.”

Despite the downgrade in 2025, Reeves said the OBR had upgraded its forecasts for subsequent years with GDP expected to increase by 1.9% in 2026, 1.8% in 2027, 1.7% in 2027 and 1.8% in 2029.

The OBR also forecast that the government’s planning reforms will increase GDP permanently by 0.2% in 2029/30, representing an additional £6.8 billion and pushing housebuilding to a “40-year high”.

Reeves was forced to set out around £14 billion of savings to ensure she met her “non-negotiable” goal of balancing day-to-day spending against tax receipts, rather than borrowing.

She told the Commons: “The increased global uncertainty has had two consequences. First, on our public finances. And second, on the economy.”

Reeves has now confirmed further cuts to the welfare budget to save £4.8 billion, cuts in Whitehall to save £3.5 billion, and said that overall day-to-day spending will be reduced by £6.1 billion by 2029/30.

The OBR said the £14 billion of measures to restore Ms Reeves’s headroom came from “direct savings from welfare reforms and the reduction in day-to-day departmental spending” along with the “indirect boost” from the planning reforms.

Shadow Chancellor Mel Stride accused Reeves of having “tanked the economy”, saying she “borrowed and spent and taxed like it was the 1970s.”

He told the Commons: “The Chancellor likes to tour the television studios and tell everybody they should be thankful that she will not be ramping up taxes in this ’emergency budget’ as she did before.

“But that will be cold comfort to the millions up and down the country waiting in fear and trepidation for the start of the new tax year, buckling under the burden of tax that’ll be rising to the highest tax burden on her watch in the history of our country.”

He added: “She taxed jobs and wealth creation, she’s destroyed livelihoods, businesses clobbered big and small, small companies – the backbone of our economy, enterprise – crushed on the altar of her ineptitude.”