Taxes on wages within the UK rose at a sooner tempo than any nation tracked by the OECD as Chancellor Rachel Reeves’ measures have squeezed individuals’s incomes.
A brand new report by the OECD – the Organisation for Financial Co-operation and Growth – has discovered that taxes within the UK for single staff jumped larger than any nation throughout the OECD, which has 38 member international locations together with the US, France, Japan and Australia.
Economists stated the taxes rose by 2.45 share factors for a single employee incomes the common wage in 2025 in comparison with an OECD common of 1.15 share factors.
OECD analysts blamed the Reeves’ hike to employers’ nationwide insurance coverage contributions (NICs) for the leap within the tax burden whereas including that Tory-era insurance policies to increase a freeze on revenue bands was additionally including to fiscal drag.
Analysts discovered that the tax wedge, measured by taxes as a portion of wages, was 32.4 per cent for staff incomes a median wage of £55,9983. The OECD common for a single employee was barely larger at 35.1 per cent.
Single Brits incomes £93,491 suffered a tax burden of 39.3 per cent. Earnings taxes are the principle levy utilized to wages.
Nations the place single staff on common wages had a bigger tax wedge included Belgium, Germany and Italy.
Married {couples} within the UK who have been on each common and better salaries continued to get pleasure from a decrease stage of tax wedge than single women and men.
The OECD stated the common wedge for married staff elevated at the next price than for single staff throughout most international locations, with the common stage for practically all eight family varieties hitting its highest stage since not less than 2018.
Reeves’ tax hikes chunk
The Paris-based assume tank’s findings on the UK displays the results of the large £40bn tax hike Reeves made in her first Funds in 2024, with adjustments coming into impact final April.
The primary coverage within the Funds concerned slicing the wage threshold at which employers start to pay NICs to £5,000 whereas the speed was elevated to fifteen per cent.
Employers have broadly blamed larger labour prices that got here because of the NICs enhance for employees being laid off or hiring plans being delayed.
Knowledge this week confirmed that emptiness ranges had dropped to a five-year low whereas the unemployment price remained larger than when Labour took workplace in mid-2024.
Shadow chancellor Sir Mel Stride stated the report confirmed that Reeves was taxing “working individuals” regardless of a pledge to not.
“That’s reckless and completely unsustainable for our financial system,” Stride stated.
