During a week dominated by news from the Middle East, the Chancellor, Rachel Reeves, presented the government’s Spring Forecast to Parliament on 3 March 2026.
The Chancellor told MPs that economic stability had been restored, pointing to the latest projections from the Office for Budget Responsibility.
While the government focused on signs of economic growth, particularly when measured by GDP per person, the OBR’s report paints a more complex picture. It suggests that the fiscal environment remains tight and that the next Budget will take place against a challenging backdrop.
As part of the government’s policy to hold only one major fiscal event each year, the Spring Forecast included no new tax or spending announcements. However, the updated forecasts provide useful signals about where future tax pressures may emerge.
A steadily rising tax burden
One of the clearest messages from the OBR’s projections is that the overall tax burden is expected to continue rising.
Taxes are forecast to reach 38.5% of GDP by 2030/31, which would represent the highest level since the Second World War.
A major driver of this increase is the continued freeze on income tax thresholds, which is currently scheduled to remain in place until April 2031. As wages rise over time, more people will be pushed into higher tax brackets even if their real financial position has not changed.
This phenomenon, often described as fiscal drag, means that many individuals and business owners may find themselves paying higher levels of tax without any formal rate increases being introduced.
The state pension and income tax
Another interesting point raised in the forecast relates to the state pension.
From 2027/28, the full state pension is expected to exceed the personal allowance. This could potentially bring around 600,000 more people into the income tax system by 2026/27, rising to approximately one million by 2030/31.
The government has stated that it does not intend for pensioners whose only income is the basic or new state pension to pay income tax during this Parliament. However, the detailed policy explaining how this will work in practice has not yet been confirmed.
National insurance and hiring pressures
The OBR also notes that the increase in employer national insurance contributions, introduced last April, is contributing to the higher tax take.
For businesses, this increase in employment costs may influence hiring decisions. At the same time, the OBR forecasts that unemployment could rise to around 5.3% in 2026 before gradually falling back to 4.1% by 2030.
For many employers, the combination of higher payroll costs and economic uncertainty may encourage a more cautious approach to recruitment.
Self assessment and international tax changes
Self assessment payments are expected to increase significantly during the 2026/27 tax year.
Part of this rise is linked to the abolition of the UK’s non-domiciled tax regime in 2025/26, alongside a temporary facility that allows certain overseas income to be brought back to the UK.
Anyone with overseas income, assets or international financial arrangements should review their position carefully, as these changes may have a meaningful impact on future tax liabilities.
Capital taxes and investment planning
The OBR also expects receipts from capital taxes to rise.
Strong performance in UK equity markets has increased the value of many portfolios, which means more investors could be facing capital gains tax when they sell assets.
If you hold UK shares or other investments, this may be an appropriate time to review your portfolio and consider whether crystallising gains, rebalancing holdings or making use of available allowances could improve your tax position.
Any such planning needs to take account of anti-avoidance rules such as the ‘bed and breakfasting’ rules, which restrict the immediate repurchase of assets after they have been sold.
Why proactive tax planning matters more than ever
Taken together, the OBR’s report suggests that tax planning will become increasingly important over the coming years.
For individuals and business owners alike, this means:
-
monitoring available allowances carefully
-
thinking about the timing of income, gains and dividends
-
making sure reliefs are fully utilised
-
reviewing pension contributions and investment structures
-
considering how assets are held within a family
Small adjustments made early can often make a meaningful difference to future tax liabilities.
As the tax landscape continues to evolve, taking a proactive approach to financial planning will be key to keeping tax bills under control while maintaining long-term financial stability.