Taxes on wages in the UK rose at a faster pace than any country tracked by the OECD as Chancellor Rachel Reeves’ measures have squeezed people’s incomes.
A new report by the OECD – the Organisation for Economic Co-operation and Development – has found that taxes in the UK for single workers jumped higher than any country across the OECD, which has 38 member countries including the US, France, Japan and Australia.
Economists said the taxes rose by 2.45 percentage points for a single worker earning the average wage in 2025 compared to an OECD average of 1.15 percentage points.
OECD analysts blamed the Reeves’ hike to employers’ national insurance contributions (NICs) for the leap in the tax burden while adding that Tory-era policies to extend a freeze on income bands was also adding to fiscal drag.
Analysts found that the tax wedge, measured by taxes as a portion of wages, was 32.4 per cent for workers earning an average salary of £55,9983. The OECD average for a single worker was slightly higher at 35.1 per cent.
Single Brits earning £93,491 suffered a tax burden of 39.3 per cent. Income taxes are the main levy applied to wages.
Countries where single workers on average wages had a larger tax wedge included Belgium, Germany and Italy.
Married couples in the UK who were on both average and higher salaries continued to enjoy a lower level of tax wedge than single men and women.
The OECD said the average wedge for married workers increased at a higher rate than for single workers across most countries, with the average level for nearly all eight household types hitting its highest level since at least 2018.
Reeves’ tax hikes bite
The Paris-based think tank’s findings on the UK reflects the effects of the massive £40bn tax hike Reeves made in her first Budget in 2024, with changes coming into effect last April.
The main policy in the Budget involved cutting the salary threshold at which employers begin to pay NICs to £5,000 while the rate was increased to 15 per cent.
Employers have widely blamed higher labour costs that came as a result of the NICs increase for staff being laid off or hiring plans being delayed.
Data this week showed that vacancy levels had dropped to a five-year low while the unemployment rate remained higher than when Labour took office in mid-2024.
