EL7.AI
Macro EconomyMedium•28 October 2026•
3 min read

UK tax burden forecast to rise to 38.6% of GDP by 2031-2032

Key Facts

1The Office for Budget Responsibility expects taxes to rise to 38.6% of GDP in 2031-2032, the highest level since 1948.
2The bank surcharge will temporarily rise from 3% to 6% for 15 months from 1 January 2027.
3HM Revenue & Customs estimates the increase will raise £950 million in 2027-2028.
4The government is allocating £2.6 billion for energy support, including a £100 payment for up to 20 million households.

The Office for Budget Responsibility forecast that UK taxes would rise to 38.6% of gross domestic product in fiscal year 2031-2032, the highest level since the current records began in 1948, according to an Associated Press report published by The Independent. The share rises from 36% in 2025-2026, with estimates showing it reaching 37.9% in 2027-2028. Taxes were equivalent to 32.9% of GDP in 2019-2020, before the pandemic. The upward path comes alongside forecasts of slower economic growth and weak real income growth. In parallel, the government announced a temporary increase in the bank corporation tax surcharge from 3% to 6%.

The Office for Budget Responsibility said higher income tax and National Insurance contributions, particularly alongside the freeze on personal tax thresholds, are the biggest driver of the increase in the tax burden. The share is expected to rise to 37.9% of GDP in 2027-2028, before continuing higher to a peak of 38.6% in 2031-2032. That puts the final estimate about six percentage points above the pre-pandemic level of 32.9% in 2019-2020. The office expects the economy to grow 1.2% in 2026, then 1% in 2027, compared with its previous forecast of 1.6% for that year, the Associated Press reported. The office attributed weaker growth in 2027 to the economic shock caused by the Iran war.

The temporary bank surcharge increase covers the period from 1 January 2027 to 31 March 2028, after which the rate returns to 3% on 1 April 2028, according to HM Revenue & Customs. The surcharge applies to profits of banks and building societies above an allowance of £100 million. The agency estimated the measure would add £305 million to revenue in 2026-2027, £950 million in 2027-2028 and £220 million in 2028-2029. The government said the increase would help fund a £100 energy payment for eligible households in England. The energy support program is worth £2.6 billion and is aimed at up to 20 million households from January 2027.

Chancellor John Healey said banks that benefited from higher interest rates would contribute to funding support for households. Referring to the pressures the budget is intended to ease, Healey said households face "higher prices at petrol stations, higher energy bills and larger mortgage payments," while businesses face higher operating and borrowing costs. He added that the impact of the conflict is also visible in public finances. Shares in Lloyds, NatWest and Barclays rose between 2.2% and 3.7% on 28 October, leading gains in the FTSE 100, after the increase was smaller than investors had feared, Reuters reported. HM Revenue & Customs said the measure was not expected to have a significant macroeconomic impact, and that it affects banking companies without directly affecting individuals.

The government said the period for the increase would not be extended and that it would be legislated for in the Finance Bill 2026-2027. The new rate takes effect on 1 January 2027 and ends on 31 March 2028, according to the Treasury. The Office for National Statistics has set 20 November 2026 as the publication date for the next UK retail sales release. This is part of the official schedule for monitoring economic data after the budget announcement. The date for the bank surcharge to return to 3% remains 1 April 2028.