How the New Tax Suite is Messing with Your Wallet
Policy Engine’s latest study for the Institute of Economic Affairs has the whole country groaning – and not just because of the bad play in the football league. The government’s tax revamp is slapping a small wallet every homeowner, employer, and car owner in every corner of the UK with a fresh dose of hard cash.
What the Government Has Tossed Into the Box
- Employer National Insurance has jumped from 13.8 % to 15 %, and the threshold has been lowered. On average, this means a household will shed £818 a year.
- Capital Gains Tax for basic‑rate citizens is nearly double – from 10 % to 18 %. Expect a £150 hit per family.
- Council Tax has crept up by 5 %. That’s another £96 added to the monthly bill.
- Stamp Duty thresholds have been cut in half: the nil‑rate band for first‑time buyers shrank from £425,000 to £300,000, and for other buyers from £250,000 to £125,000, costing families an average of £48.
Where the Pain Is Heaviest
Here’s how the impact looks across the country:
- London – Median households will pay an extra £718.
- West Midlands – Not far behind, with an increase of £637.
- East Midlands – The lightest blow, at £422, but still a real dent.
That’s a serious shock, especially when the total haul for the Treasury tops out at £26.95 billion. And if that isn’t enough, the bonanza isn’t stopping there.
Riding the VED Wave
From 1st April, the vehicle excise duty (VED) overhaul will kick in: most new petrol and diesel cars will face a 100 % spike in first‑year road tax, and electric vehicles will, for the first time ever, be taxed for the roads they ride on.
Are We in a Tax–tastic Time?
The package is pushing the UK to its highest tax burden ever. And the weights are falling where the planet makers want them to – on the everyday people.
What Tom Clougherty Says
“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.”
What Nikhil Woodruff Adds
“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.”
Bottom Line
We’re looking at a tax package that is a real hammer swing – with the thud echoing across London, the Midlands, and beyond. The price tag is high, the burden real, and the time for a simpler, smarter system has never been more urgent.
