Britain is heading for one of the sharpest tax rises among advanced economies, with the International Monetary Fund forecasting that Government tax revenues will exceed 42% of GDP by the start of the 2030s. Figures from the Office for Budget Responsibility suggest the overall tax burden will have risen from 32% of GDP in 2010 to an estimated 38.5% by 2031. Critics warn that the UK may be nearing peak tax, as frozen thresholds, stealth taxes and higher marginal rates increasingly hit workers, professionals and businesses. Economists say the bigger issue is not just the overall tax burden but whether the system discourages work, promotion, hiring and spending.

Only 25% of sole traders and landlords have registered for the UK’s new digital tax system, which began on April 6. The Making Tax Digital for Income Tax scheme requires those earning over £50,000 to use authorised software for quarterly updates to HMRC. Data from the tax office shows that only 218,000 out of the 864,000 taxpayers required to sign up have done so. Josh Toovey, senior research and policy officer at the Association of Independent Professionals and the Self-Employed, has voiced concern over the low registration rates, pointing to a “significant awareness gap” around the requirements, “particularly among those who do not have the support of an accountant.”

Rachel Reeves plans a £600m tax increase on shared office providers in England. The Chancellor’s changes to business rates will likely burden landlords with an additional £594m annually amid the Valuation Office Agency’s new classification of shared offices. Experts warn that property owners may pass this on to tenants. This could raise average rental costs by £5,400 for small businesses, potentially forcing 150,000 people back to remote work.

Figures from the Insolvency Service show that 2,022 registered companies in England and Wales went into insolvency in March, a 7% increase from February’s 1,895. The surge is attributed to rising energy prices and weak consumer confidence, exacerbated by the conflict in the Middle East. The figures include 299 compulsory liquidations, 1468 creditors’ voluntary liquidations, 235 administrations, and 20 company voluntary arrangements. Tom Russell, president of restructuring body R3, said: “At this stage, businesses can no longer assume that conditions will quickly return to normal.” He urged firms to implement contingency plans to navigate these challenging times. The Insolvency Service data also shows that the number of people going financially insolvent jumped by 30%, year-on-year, with 12,252 personal insolvencies in March.

Sarah Breeden, the Bank of England’s deputy governor for financial stability, has warned of a potential financial crash due to rising private credit, soaring sovereign debt, and stock market exuberance. She described the impact of the conflict in Iran as “the worst energy shock in my living memory,” warning that it is exacerbating stress on the financial system. Ms Breeden noted that current risks echo past financial crises, highlighting the dangers of high leverage and opaque markets. She added that a credit crunch in private markets could tighten financing conditions for the UK economy, potentially leading to widespread defaults and markdowns.

The UK economy is on the verge of a technical recession due to rising energy costs and supply chain disruptions, according to EY Item Club forecasts. GDP growth is expected to slow to 0.7% in 2026, down from 1.4% last year. Inflation is projected to nearly double the Bank of England’s 2% target by year-end. Separate data from EY shows that 49% of profit warnings from UK-listed businesses in Q1 cited policy change and geopolitical uncertainty as a key factor.

Deloitte’s latest CFO survey reveals a significant drop in confidence, with optimism falling to a net -57% from -13% in the previous quarter. Conducted between March 16 and 30, the survey highlights rising concerns over energy prices, inflation, and interest rates.

The chief executives of HSBC, Barclays, Lloyds, NatWest, and Santander are set to meet with Chancellor Rachel Reeves to address the economic impact of the Middle East conflict. The summit will see lenders asked to update officials on their commitment to supporting 1.6m customers with expiring fixed-rate deals as part of the Government’s mortgage charter. The Bank of England predicts that more than 1m households could see the cost of servicing loans increase. It is noted that banks have pulled about 1,500 mortgage products amid uncertainty linked to the conflict, with data from the Bank’s Financial Policy Committee showing that many have increased interest rates on their remaining 7,000 home loan products. The Bank forecasts that about 5.2m borrowers – around 58% of those with a home loan – could see higher mortgage payments by the end of 2028. Lenders will also be asked for their observations on consumer behaviour amid the crisis.

A report from the International Monetary Fund (IMF) shows that the UK has reclaimed its position as the fifth-largest economy globally, surpassing India. The UK economy, valued at £4.26trn, is expected to overtake Japan by 2029 and potentially Germany by 2040. With the IMF’s analysis highlighting the UK’s strength in services, which constitute 59% of its exports, Hamish McRae in the Mail on Sunday suggests that Chancellor Rachel Reeves “should be on her knees thanking the City for saving the economy.” He warns that there is “zero room for complacency,” saying: “We have lost a lot of highly talented people as a result of the tax policies of this Government and its predecessor. There are weak points even in finance.”

Former Foreign Secretary David Miliband, the head of the International Rescue Committee, has warned that cuts to overseas aid by the UK and US could destabilise the global economy. Expressing regret over the Government’s decision to cut the UK’s aid budget, Mr Miliband said supporting the world’s poorest was morally the right thing to do and a “good investment for Britain.” He also voiced concern that the Middle East conflict would increase global poverty and risks displacing millions of people. Figures from the Organisation for Economic Co-operation and Development show that wealthy countries cut aid spending by $174.3bn in 2025, a decline of almost a quarter from 2024.

With the Bank of England considering its next move on interest rates amid economic uncertainty caused by the conflict in Iran, Panmure’s chief economist, Simon French, predicts a “high bar” for any rate changes, despite rising inflation expectations. He believes that inflation could peak at between 3.5% and 4% later this year, well below the expectations of some other City analysts, citing higher unemployment and the “welcome development” of the Government’s more prudent approach in offering energy price support compared to 2022.

Claire Coutinho, the Shadow Energy secretary, has warned that businesses are facing severe challenges due to soaring energy bills, primarily driven by high system costs rather than electricity prices. She argues that a new subsidy scheme announced by the Government will only assist 0.2% of businesses, leaving many, including pubs and small manufacturers, without support. The Conservatives have proposed a Cheap Power Plan to reduce electricity bills by 20% for all, addressing the underlying costs. Ms Coutinho argues that taxes are making energy expensive and notes that the Cheap Power Plan would axe the carbon tax and remove non-commodity costs.

Rain Newton-Smith, chief executive of the Confederation of British Industry (CBI), has warned that high energy costs are hurting UK businesses. Outlining concerns that “policy costs are making our businesses uncompetitive and vulnerable in a crisis,” she has urged the Government to consider removing these costs from electricity bills, which account for about 20% of expenses for medium-sized businesses. Noting that the UK “already had very elevated energy costs for firms” prior to the conflict in the Middle East, Ms Rain Newton-Smith said: “Rightly, there has been a lot of focus on households but we don’t hear enough about how businesses are impacted by those high energy costs.”

Senior officials from the US Federal Reserve, the European Central Bank and the Bank of England are set to participate in a wargaming exercise in Washington to assess responses to a potential collapse of a globally significant bank. The event, organised by the Federal Deposit Insurance Commission, aims to enhance co-ordination among regulators. It comes amid concerns over the growing risks to financial stability from AI and private credit lending. Officials have voiced concern over the capabilities of Anthropic’s Mythos AI model, which experts say poses a risk due to its ability to expose flaws in IT systems. Bank of England governor Andrew Bailey, who also chairs the Financial Stability Board of global regulators, said such risks could threaten banks and represent “a very serious challenge for all of us.”

Unemployment in the UK is projected to exceed 2.1m for the first time since 2014, rising from 1.87m today. Economists at the EY Item Club predict the jobless rate will increase from 5.2% to 5.8% next year due to the economic impact of the Iran war. Matt Swannell, chief economic adviser at the EY Item Club, said: “The recent spike in energy prices and disruption to supply chains will be the biggest jolt to the jobs market since the pandemic.” The forecast indicates a potential recession as living standards decline and consumer confidence plummets.

Katharine Braddick, the incoming deputy governor for prudential regulation at the Bank of England and chief executive of the Prudential Regulation Authority, has appeared before the Treasury Committee to discuss oversight of the banking sector. Ms Braddick was asked about the leverage ratio buffers that limit the operations of building societies, with the Building Societies Association having previously told MPs that overhauling these capital restrictions could boost the sector. She told the committee that she would not commit to changing buffers until she formally takes up the role in June and reviews the technical details.

One in eight small businesses in Scotland has faced a cyber-attack, according to a new study by Innovec. Over half of the 500 surveyed firms expressed concerns about their vulnerability to data breaches. Many lack resilience against operational shutdowns, with fewer than 10% providing regular cyber security training. The survey revealed that 75% of SMEs could face severe financial distress within a month of a complete operational shutdown.

The latest Start-Up Ambition report from Enterprise Nation reveals that 47% of employees aspire to start their own business. However, half of new businesses fail within three years, according to Experian. Buying an established business or franchise is gaining popularity, with enquiries up 42% over five years. Andrew Markou, CEO of BusinessesForSale, notes increased interest from younger graduates and older professionals. Tina McKenzie from the Federation of Small Businesses advises potential buyers to focus on financials and conduct thorough due diligence.