The Adam Smith Institute warns that the tax burden on workers in Britain is at its highest in 40 years and is projected to reach unprecedented levels within three years. This year’s “tax freedom day” fell six days later than last year, marking the latest date since 1985. The think tank predicts that by 2028, this day could be as late as June 24, surpassing historical tax burdens seen during the Second World War. James Lawson, chairman of the Adam Smith Institute, stated: “A tax system that consumes 162 days of our working year is…not sustainable.” The report highlights that the top 1% of earners contributed 28.2% of total tax liabilities, with many wealthy individuals considering leaving the UK due to increasing tax pressures.

Top economists are warning that British taxpayers should prepare for significant tax increases this autumn following Chancellor Rachel Reeves’ announcement of a £190bn spending review. The review, which includes additional funding for the NHS, defence, housing, and nuclear energy, has raised concerns about a potential shortfall of up to £23bn. KPMG’s chief UK economist, Yael Selfin, said: “Looking ahead to the autumn budget, by cementing in substantial increases in departmental spending, Reeves has made further tax rises look increasingly inevitable.” Business leaders, including Rain Newton-Smith from the Confederation of British Industry, have cautioned against imposing more tax burdens on firms, asserting that “business cannot shoulder more” tax hikes.

Rachel Reeves is intensifying tax collection efforts as the tax gap has ballooned to £40bn, with some estimates suggesting it could be as high as £100bn. To tackle this, the Chancellor has allocated £100m to HMRC, hiring compliance officers and employing advanced artificial intelligence to identify tax evasion. Ian Robotham, legal director at Pinsent Masons, noted that Reeves has set “very hard targets” for HMRC, which has already seen a significant increase in tax investigations. In the tax year ending April 2024, specialist investigations alone generated £1.5bn, more than double the previous year’s recovery. HMRC is focusing on high-income individuals and utilising data from various sources, including social media, to uncover discrepancies.

Steven Fine, CEO of Peel Hunt, has called for significant tax cuts to rejuvenate London’s stock market amidst a wave of delistings. He advocates for the abolition of stamp duty on share trades and the reinstatement of dividends tax credits for pension funds, which were removed in 1997. Fine said: “There are a lot of levers at our disposal that we could pull that either wouldn’t cost the exchequer a bean or could significantly move the dial on the mindset of people you want to commit to growth in the UK.” Despite recent exits, he believes there are still promising British businesses keen on London IPOs under favourable conditions.

Jobless benefits claims in the UK have surged by nearly 40% in certain areas over the past year, revealing the impact of recent tax increases. According to the Office for National Statistics (ONS), the claimant count rose to 1,733,645 in May, an increase of 8% or 128,355 from the previous year. The rise has been particularly pronounced among younger workers, with 303,280 claimants aged 18-24, marking a 10% increase. Kate Nicholls, chief executive of UK Hospitality, commented: “Losing more than 100,000 jobs across the economy in a month goes far beyond the worst-case scenario predicted.” The unemployment rate has reached 4.6%, the highest in nearly four years.

Research indicates that nearly a third of smaller UK firms have paused or reduced operations due to financing difficulties. According to YouGov data analysed by Manx Financial Group, 30% of small- and medium-sized enterprises (SMEs) have cut back on hiring, research and development, and marketing since 2023. Douglas Grant, chief executive of Manx, stated: “Accessing finance remains difficult, and this funding gap threatens not only their survival but also the broader UK economy.” With 38% of SMEs anticipating stagnation over the next year, the need for targeted measures to unlock credit is critical. The UK Government has raised the national insurance threshold to support smaller firms, but many still face high borrowing costs and inflexible terms.

Salesforce has issued a warning that the UK may not achieve its economic growth goals without accelerating investment in workforce skills to keep pace with the rapid development of AI technologies. Despite advancements in infrastructure, there is a significant skills gap, with Salesforce supporting a government initiative to train 7.5m workers in AI skills over the next five years. Zahra Bahrololoumi CBE, Salesforce’s chief executive of UKI, commented: “Agentic AI represents a new economic model reshaping UK businesses.” The need for widespread skills development is critical, as 78% of firms are already using AI agents, anticipating a 26% productivity increase.

Victoria Saporta, a director at the Bank of England claims Reform UK’s plan to stop the central bank paying banks for their overnight cash reserves would lead to greater volatility in the markets. Richard Tice, the party’s deputy leader, accused the BoE last week of a “systemic misuse of taxpayers’ money” by paying interest and selling its existing stockpile of government bonds at substantial losses. The BoE did not start paying interest on reserves until 2006. Saporta explained that “monetary policy [is implemented] through the interest we pay on reserves.” Mr Tice said in response that the comments “ignore the fact that some other central banks are neither paying interest on QE reserves nor doing quantitative tightening.”

Borrowing costs have increased as investors express concerns over how Chancellor Rachel Reeves will finance her spending plans. The yield on ten-year gilts peaked at 4.62%, reflecting worries that the Chancellor may need to raise taxes or increase borrowing. Despite a slight easing to 4.55% due to lower-than-expected US inflation, the UK still faces the highest borrowing costs among the G7 nations. Neil Mehta from RBC BlueBay Asset Management noted that “another fiscal event goes by with little resolved,” indicating ongoing investor apprehension regarding the sustainability of fiscal policy.

Coinbase is significantly increasing its presence in the UK, with plans to hire extensively as the country approaches a new regulatory framework for cryptocurrency. Keith Grose, Coinbase’s UK lead, stated: “We’re going to be hiring like crazy in the UK,” adding that London will be a key global office. The expansion coincides with the UK’s efforts to establish a comprehensive regulatory regime, which Grose believes could provide a strategic advantage. Coinbase’s recent VASP registration from the FCA allows it to operate more freely in the UK, further solidifying its commitment to the market.