London Daily

Focus on the big picture.
Monday, Oct 20, 2025

Higher taxes look to be here to stay, says IFS

Higher taxes look to be here to stay, says IFS

The UK has entered a "new era" of higher taxes, the Institute for Fiscal Studies (IFS) think tank has said.

Its director Paul Johnson said that middle earners were "set for a shock" with taxes going up and prices soaring.

In his Autumn Statement, the chancellor announced plans to increase taxes to shore up the public finances and to provide help with energy bills.

The toughest decisions on spending cuts had been delayed until after 2024, the IFS said in its analysis of the plans.

On Friday, Chancellor Jeremy Hunt acknowledged there were "very difficult times ahead" but said his plans gave people "certainty" on how the government would help them through the recession.

But the IFS's Mr Johnson warned that living standards were facing the "biggest fall in living memory" due to weak economic growth, an ageing population and high levels of government borrowing in the past.

"The truth is we just got a lot poorer. We are in for a long, hard, unpleasant journey; a journey that has been made more arduous than it might have been by a series of economic own goals," Mr Johnson said.

On Thursday, the government's independent forecaster, the Office for Budget Responsibility, said the UK was in a recession and forecast that the economy would shrink next year.

Mr Johnson described the economic backdrop as "grim", and said the tax burden was unlikely to return to its pre-pandemic average "for several decades".

In total, the plans announced on Thursday amount to about £25bn in tax rises. The measures include:

*  Tax thresholds being frozen until April 2028, meaning millions will pay more tax

*  The top 45% additional rate of income tax starting for people earning over £125,140, instead of £150,000

*  Local councils in England being allowed to raise council tax by 5% a year without a local vote, instead of 3% currently

Mr Johnson said people on middle incomes would be hardest hit, because they would not benefit from targeted government support.

"Their wages are falling and their taxes are rising. Middle England is set for a shock," he said.

According to the think tank's analysis, households will pay energy bills that are £900 a year higher than they are now - after the energy price cap rises in April and without this year's £400 rebate.

Daniel Cooke, a father of three, told the BBC he won't qualify for extra help, but he has already had to take on a second job delivering takeaways in the evenings to make ends meet.

Daniel Cooke has taken on a second job in the evenings to help with the bills


"We've been able to almost survive with the assistance that's come through from the government… [it's now] going to be taken away from us through almost no fault of our own.

"It's a very frightening, very worrying time for us as a young family. How we're going to pay for our bills, how we're going to pay for our gas and electric - I have no idea."

In the Autumn Statement, the chancellor announced he was extending the freezing of tax thresholds for a further two years up to 2028. That means the threshold where you start paying tax is fixed, rather than rising with inflation. So people will pay a higher proportion of their earnings in tax as their wages go up.


While taxes will rise from April, almost all spending cuts will be delayed until after 2024, when the next general election is expected, a move which drew criticism from some parts of the Conservative Party.

Former business secretary Jacob Rees-Mogg urged the chancellor to look at further government spending cuts "before reaching for the easy options of putting up taxes".

But Mr Hunt defended his plans, telling the BBC's Today programme: "Sound money matters more than low taxes."

He also denied that the announcements constituted a "raid on working people", and suggested that it was not possible to raise £25bn "just focusing on a very small group of very rich people".

As well as tax rises for people on average incomes, he said his plan involves "looking after the most vulnerable", pointing towards new targeted payments for pensioners, people on means-tested benefits and people who claim disability benefits to help with rising bills.

The Autumn Statement was also praised by the International Monetary Fund (IMF) for balancing the need to bring prices down and protect people's earnings during a difficult time for the economy.

"We welcome the government's efforts to better protect the vulnerable and to prioritise education, health, and investment," the IMF said, which was in stark contrast to the criticism it offered Kwasi Kwarteng in the wake of September's mini-budget.

But shadow chancellor Rachel Reeves said the government could have made "fairer choices" around tax.

"We need a serious plan to grow our economy," she told BBC Breakfast, criticising the government's decision to reduce the tax surcharge on banks, and its failure to introduce a non-dom tax status or to tax private equity bonuses.

"If [the government] did some of those things, [it] wouldn't have needed to increase taxes on ordinary people. This government comes time and again for the pockets of the ordinary man and woman rather than for those with the broader shoulders," she added.

The IFS analysis also found that ordinary households will be 30% worse off by 2028 than they would have been had incomes continued to grow as they did before the 2008 financial crisis.

Its findings chimed with those of the Resolution Foundation, a think tank that focuses on people on lower incomes.

The Resolution Foundation said that the chancellor's economic plans would add more pressure on the "squeezed middle", who face a permanent 3.7% hit to their incomes, which is bigger than the very richest.

It added that it thought the spending cuts outlined on Thursday were likely to be "undeliverable" as they would require "years of holding down public sector wages below those in the private sector".

Newsletter

Related Articles

0:00
0:00
Close
China Warns UK of ‘Consequences’ After Delay to London Embassy Approval
France’s Wealthy Shift Billions to Luxembourg and Switzerland Amid Tax and Political Turmoil
"Sniper Position": Observation Post Targeting 'Air Force One' Found Before Trump’s Arrival in Florida
Shouting Match at the White House: 'Trump Cursed, Threw Maps, and Told Zelensky – "Putin Will Destroy You"'
Windows’ Own ‘Siri’ Has Arrived: You Can Now Talk to Your Computer
Thailand and Singapore Investigate Cambodian-Based Prince Group as U.S. and U.K. Sanctions Unfold
‘No Kings’ Protests Inflate Numbers — But History Shows Nations Collapse Without Strong Executive Power
Chinese Tech Giants Halt Stablecoin Launches After Beijing’s Regulatory Intervention
Manhattan Jury Holds BNP Paribas Liable for Enabling Sudanese Government Abuses
Trump Orders Immediate Release of Former Congressman George Santos After Commuting Prison Sentence
S&P Downgrades France’s Credit Rating, Citing Soaring Debt and Political Instability
Ofcom Rules BBC’s Gaza Documentary ‘Materially Misleading’ Over Narrator’s Hamas Ties
Diane Keaton’s Cause of Death Revealed as Pneumonia, Family Confirms
Former Lostprophets Frontman Ian Watkins Stabbed to Death in British Prison
"The Tsunami Is Coming, and It’s Massive": The World’s Richest Man Unveils a New AI Vision
Outsider, Heroine, Trailblazer: Diane Keaton Was Always a Little Strange — and Forever One of a Kind
Dramatic Development in the Death of 'Mango' Founder: Billionaire's Son Suspected of Murder
Two Years of Darkness: The Harrowing Testimonies of Israeli Hostages Emerging From Gaza Captivity
EU Moves to Use Frozen Russian Assets to Buy U.S. Weapons for Ukraine
Europe Emerges as the Biggest Casualty in U.S.-China Rare Earth Rivalry
HSBC Confronts Strategic Crossroads as NAB Seeks Only Retail Arm in Australia Exit
U.S. Chamber Sues Trump Over $100,000 H-1B Visa Fee
Shenzhen Expo Spotlights China’s Quantum Step in Semiconductor Self-Reliance
China Accelerates to the Forefront in Global Nuclear Fusion Race
Yachts, Private Jets, and a Picasso Painting: Exposed as 'One of the Largest Frauds in History'
Australia’s Wedgetail Spies Aid NATO Response as Russian MiGs Breach Estonian Airspace
McGowan Urges Chalmers to Cut Spending Over Tax Hike to Close $20 Billion Budget Gap
Victoria Orders Review of Transgender Prison Placement Amid Safety Concerns for Female Inmates
U.S. Treasury Mobilises New $20 Billion Debt Facility to Stabilise Argentina
French Business Leaders Decry Budget as Macron’s Pro-Enterprise Promise Undermined
Trump Claims Modi Pledged India Would End Russian Oil Imports Amid U.S. Tariff Pressure
Surging AI Startup Valuations Fuel Bubble Concerns Among Top Investors
Australian Punter Archie Wilson Tears Up During Nebraska Press Conference, Sparking Conversation on Male Vulnerability
Australia Confirms U.S. Access to Upgraded Submarine Shipyard Under AUKUS Deal
“Firepower” Promised for Ukraine as NATO Ministers Meet — But U.S. Tomahawks Remain Undecided
Brands Confront New Dilemma as Extremists Adopt Fashion Labels
The Sydney Sweeney and Jeans Storm: “The Outcome Surpassed Our Wildest Dreams”
Erika Kirk Delivers Moving Tribute at White House as Trump Awards Charlie Presidential Medal of Freedom
British Food Influencer ‘Big John’ Detained in Australia After Visa Dispute
ScamBodia: The Chinese Fraud Empire Shielded by Cambodia’s Ruling Elite
French PM Suspends Macron’s Pension Reform Until After 2027 in Bid to Stabilize Government
Orange, Bouygues and Free Make €17 Billion Bid for Drahi’s Altice France Telecom Assets
Dutch Government Seizes Chipmaker After U.S. Presses for Removal of Chinese CEO
Bessent Accuses China of Dragging Down Global Economy Amid New Trade Curbs
U.S. Revokes Visas of Foreign Nationals Who ‘Celebrated’ Charlie Kirk’s Assassination
AI and Cybersecurity at Forefront as GITEX Global 2025 Kicks Off in Dubai
DJI Loses Appeal to Remove Pentagon’s ‘Chinese Military Company’ Label
EU Deploys New Biometric Entry/Exit System: What Non-EU Travelers Must Know
Australian Prime Minister’s Private Number Exposed Through AI Contact Scraper
Ex-Microsoft Engineer Confirms Famous Windows XP Key Was Leaked Corporate License, Not a Hack
×