Increasing tax revenues means a heaver financial burden for high and middle earners
Tax revenues are increasing, but so is the burden on high and middle earners, say leading audit, tax and business advisory firm, Blick Rothenberg.
Tom Goddard, an assistant manager at the firm, said: “HMRC’s latest statistics show that gross tax and National Insurance contributions (NIC) receipts for the period April 2025 to March 2026 totalled £938.8bn, representing an increase of £80.2bn, or 9.34%, compared with the same period a year earlier. But the impact of rising everyday taxation on high and middle earners is becoming increasingly evident.”
He added: “With the UK experiencing its highest tax burden in 70 years, there are signs that higher earners are relocating to more tax-efficient jurisdictions. Historically, the top 1% of UK earners have contributed around 30% of income tax revenues, and any reduction in this group’s contribution risks shifting the burden further towards middle-income households.”
Tom said: “Fiscal drag, where tax thresholds remain frozen but inflation or rising wages push people into higher tax brackets, is also contributing to the pressure on high and middle earners. The government extended the tax threshold freeze to April 2031 at the 2025 Autumn Budget, meaning this financial pressure point won’t go away any time soon.”
He added: “Of the £938.8bn total of NIC and gross tax, £552.8bn was generated from income tax, capital gains tax (CGT) and NICs, up £63.8bn on last year. This rise is likely driven by a combination of fiscal drag, increases to Capital Gains Tax (CGT) rates introduced from October 2024 (payable January 2026), and higher employer NIC contributions which was effective from April 2025. Inheritance tax (IHT) receipts for the same period reached £8.5bn, an increase of £200mn compared with the previous year.”
Tom said: “Higher tax receipts, however, likely contributed to government borrowing falling to a four-year low in March, supported by reduced debt interest costs. According to the Office for National Statistics (ONS), the UK government borrowed £12.6bn during the month, £1.4bn less than in March 2025.”
He added: “Additionally, unemployment fell to 4.9% in the three months to February 2026, down from 5.2% in the previous quarter. However, wage growth slowed to its weakest rate since late 2020. At the same time, taxes on wages in the UK rose more in 2025 than in any other advanced economy, according to the OECD.”
Tom said: “But external geopolitical pressures may limit the chancellor’s ability to build on this progress. Ongoing conflict in the Middle East and the war in Ukraine are expected to place further strain on public finances by reducing fiscal headroom and any tax breaks are becoming increasingly unlikely.”