Tax hikes will cost British families over £1,000 per year on average

New analysis by Policy Engine for the Institute of Economic Affairs illustrates the effect of the Government’s tax rises on British households.

The changes the Government have implemented, and their effects, are:

A rise in employer National Insurance, rising from 13.8% to 15% with a lower threshold – costing households an average of £818 per year

Capital Gains Tax almost doubling for basic rate taxpayers from 10% to 18% – adding £150 per household

Council Tax rising by 5% – costing families another £96

Stamp Duty thresholds being slashed, with the nil-rate band for first-time buyers cut from £425,000 to £300,000 and for other buyers from £250,000 to £125,000 – costing families £48 on average

The regional impact of the tax changes is starkest in London, where median households will pay an extra £718, followed by the West Midlands at £637. Households in the East Midlands will face the lowest increase at £422, though this is still a significant hit to finances.

The tax package will raise a total of £26.95 billion for the Treasury, with the employer National Insurance changes accounting for the lion’s share at £22.9 billion.

This does not take into account the rise in Vehicle Excise Duty. From 1st April, changes to VED announced in the Autumn Statement will come into effect too, with most new petrol and diesel cars facing a 100% increase in first-year road tax, and electric vehicles will begin paying road tax for the first time ever.

These reforms, coming after years of fiscal drag where income tax thresholds have remained frozen, mean the UK’s tax burden is set to reach its highest level in history.

Tom Clougherty, Executive Director at the free market think tank the Institute of Economic Affairs, said:

“The tax increases coming into force in April will weigh on household budgets and undermine economic growth.

“The employers’ national insurance hike is a slap in the face for business, coming hot on the heels of a big corporation tax increase, and alongside an increased minimum wage and more onerous employment rules. Ultimately, though, it will be workers that bear most of the burden – in the form of lower wages and fewer opportunities.

“Stamp Duty Land Tax is probably the most economically damaging tax we have, so lowering thresholds – and dragging more home purchases into the net – is bad news all round. The housing market has enough problems without tax making matters worse.

“We need a concerted effort to reduce the cost of government and move to a simpler, more economically-rational tax system. For now, though, British households are going to continue feeling the pinch.”

Nikhil Woodruff, Chief Technology Officer at Policy Engine, said:

“PolicyEngine’s simulations show that tax policy changes taking effect in April 2025 lower net incomes by an average of £1,112 per household in 2025-26, with employer NICs generating 74% of the change, assuming that households do not change behaviour and employers pass on 40% of new NICs. Our microsimulation model demonstrates how these changes affect households differently across income and geography.”