Official figures show that 680,000 people were dragged into the 40% tax bracket in 2022/23, meaning the number of higher-rate taxpayers has hit 5m for the first time. Figures published by HMRC show that 5.1m people were paying the higher rate in 2022/23, with this up 15% on the previous year. The total number of higher-rate taxpayers is on track to hit 9m by 2028, with more people lifted into the higher band due to a freeze on thresholds. Darwin Friend, from the TaxPayers’ Alliance, said: “The idea of a higher-rate level of tax is increasingly nonsensical, given the number of taxpayers who are being forced to pay it.” He has urged the Chancellor to “urgently increase” the 40% threshold “to give taxpayers a break and stop this absurd disincentive to hard work.” Tom Clougherty, executive director at the Institute for Economic Affairs, said: “More workers paying higher rates of tax is a problem for the economy because it reduces the incentive for people to increase their earnings.”

While Chancellor Rachel Reeves has claimed that the 1.2% increase in employer’s National Insurance contributions will raise £25bn per year by the end of the forecast period, Office for Budget Responsibility (OBR) analysis suggests that just £23.8bn will be raised in 2025, with £5.5bn in indirect costs. Meanwhile, costs are expected to increase to £9.1bn in 2026, taking revenue down to £14.6bn. Shadow Chancellor Mel Stride has urged the Chancellor to “urgently think again” as the “jobs tax” is a “ticking timebomb that will lead to fewer jobs, lower wages and higher prices.” Stuart Adam, senior economist at the Institute for Fiscal Studies, said that while the £25bn figure is not necessarily wrong, the OBR’s figures reflect the fact that “if employers are having to pay it has to come from somewhere,” meaning decreased profits or wages. He added: “If companies are going to have lower profits that means lower corporation tax, if lower wages then lower income tax.”

Economists at Goldman Sachs expects Rachel Reeves to deliver a £24bn tax raid this year, with higher borrowing costs and a weak economy having wiped out the Chancellor’s £10bn headroom. Goldman, which also expects the Chancellor to impose £10bn of spending cuts in the Spring Statement, believes that the Office for Budget Responsibility (OBR) is likely to downgrade its assessment of long-term UK growth. Goldman’s James Moberly expects the Government to extend income tax and employee National Insurance threshold freezes for a further two years.

A poll from the London Chamber of Commerce and Industry (LCCI) shows that 51% of businesses believe that an upcoming increase to employers’ National Insurance contributions will harm their operations. It was also found that 47% are expecting measure’s set out in last October’s Budget to hinder the UK’s economic growth. Karim Fatehi, chief executive of LLCI, said firms need “operating conditions conductive to economic growth, rather than measures that curtail their ability to invest in their business, hire new people and train their staff.”

British businesses are increasingly pessimistic, with UK sentiment falling faster than any other major economy since October, when the Chancellor set out a record £40bn of tax rises in the Budget. The poll by S&P Global saw a “sharp downgrade in sentiment in the UK.” Expectations for business activity among UK firms are now below the global average, while British businesses also posted a negative outlook for profitability for the first time since October 2022.

Profits at UK SMEs increased by 7.3% year-on-year in Q4 2024, according to Sage’s small business tracker. This is down from 8.2% in Q3 and 8.6% in Q2. It was also found that productivity fell by 0.9% year-on-year in Q4. While debt levels have fallen by 9.7% over the last year, cash reserves increased by 3.2%. Operating costs were down 0.4%, while revenues rose for the third consecutive quarter, jumping by 2.5%. Sage chief executive Steve Hare said that despite challenges such as higher costs and economic uncertainty,  SMEs, “the backbone of the UK economy, are proving their resilience.”

The Bank of England’s Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) have scrapped plans to impose diversity, equity and inclusion (DEI) targets on City firms. The financial watchdogs said the decision follows a “broad range” of feedback and acknowledges “expected legislative developments” from the Government. PRA chief executive Sam Woods has written to Meg Hillier, the chair of the Treasury Committee, saying the regulator will “remain alert to the risks of group-think” within the firms it manages. Meanwhile, the FCA also confirmed it would no longer seek to “name and shame” firms facing investigations, citing a “lack of consensus” on the matter from within the industry.

Investment platform Hargreaves Lansdown has urged ministers to cut the stamp duty on shares paid by retail investors, saying that doing so would be a “welcome first step” to improving retail investor inclusion and help boost UK markets. Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “A cut to stamp duty on share dealing would help nudge more people into investing.” She added that it is “unreasonable” for those buying UK shares to have to pay stamp duty when most overseas share trades are stamp duty free. Alastair King, the Lord Mayor of London, has also called on ministers to “look again” at the tax, while London Stock Exchange CEO Julia Hoggett last year branded the tax “pernicious.”

The question of whether Britain is a rich country is “now less straightforward” to answer than it was before, according to the National Institute of Economic and Social Research (NIESR), which has warned that 15 years of stagnation have “caused UK living standards to plummet.” The UK has tumbled down the league of affluent nations and Max Mosley, economist at the institute, said: “A combination of weak productivity growth driving near zero growth in real wages and cuts to welfare has resulted in a situation where we are neither delivering prosperity through high wages nor security through welfare.” NIESR analysis shows that average real earnings have risen by less than 3% in the UK since 2019, when taking inflation into account. They are up just 6.6% since 2007. By contrast, real earnings rose by almost 20% between 2000 and 2007. Urging ministers to act, Adrian Pabst, deputy director at the institute, said: “It is vitally important to raise public investment in ways that unlock business investment to generate productivity increases and sustained real wage growth.”

Considering the Government’s possible response to US President Donald Trump’s tariffs on imports of steel and aluminium, Prime Minister Sir Keir Starmer has said the UK will “keep all options on the table.” While the EU says it will impose counter-tariffs on £22bn of US goods, Sir Keir said the UK was taking a “pragmatic” approach and was pushing for a trade deal. The tariffs mean steel exported to the US will be subject to the 25% levy. Gareth Stace, director general at industry body UK Steel, said the US move was “hugely disappointing,” noting that some steel company contracts have already been cancelled or been put on hold.