UK taxes to rise steadily to combat mounting public spending pressures – KPMG
The UK Government faces tough tax choices in the years ahead with mounting public spending pressures versus sluggish economic growth, according to new forecasts.
Economists for KPMG said it had been an unexpectedly strong start to 2025 but the second half was looking more uncertain.
The accountancy giant is forecasting UK gross domestic product (GDP) to rise by 1.2% over 2025 and 1.1% in 2026.
Uncertainty
Consumers are expected to remain cautious in relation to spending while uncertainty about trade policy continues to pose a risk to levels of business investment, according to its latest UK Economic Outlook report.
“While the economy showed resilience at the start of the year, the second half looks more uncertain,” Yael Selfin, KPMG UK’s chief economist, said.
“Elevated tax burdens, weaker global trade and cautious consumers are likely to keep growth subdued into 2026.”
The Chancellor is facing a “tough balancing act” with “mounting pressures on health and defence spending, combined with weaker growth”, she said.
Shortfall
Rachel Reeves will also come under pressure to cover the shortfall left by policy U-turns, namely the reversal of planned welfare and winter fuel payments cuts, as well as the higher cost of government debt.
This is likely to result in tax rises in the autumn Budget, rather than cutbacks to spending on public services, KPMG forecast.
But the challenges are set to continue beyond November’s Budget and there could be a “gradual ratcheting up of tax revenues over the next decade” to meet mounting spending demands and slower economic growth.
Meanwhile, KPMG said there could be one more cut to UK interest rates before the end of the year – breaking away from other economists who have predicted rates will stay the same until 2026.
Ms Selfin said the Bank of England will “proceed cautiously” but that slowing economic growth and a weakening jobs market means it is likely to ease borrowing costs before the end of the year.
It is then forecasting another rate cuts during 2026, bringing the level down to 3.25% by the end of the year.
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Just implement a one off 2% wealth tax. The rich folk can pay it. We don’t need to feel too sorry for them. It just means their next Bentley purchase is delayed a few weeks.
The difficulty is what is the definition of rich, they cannot even agree that.
Someone who has loads of dough.
25% of retirees are millionaires.
25% of retirees have 1 million pounds in cash?
Is that important? Any wealthy person can tie up their wealth and claim cash poverty.
You said they were millionaires. If they tie up their wealth, it won’t necessarily be there when they need it most. That is different to wealthy people who have ready access to their money. Including offshore accounts and perhaps UK based assets.
But a wealth tax is usually taken to mean paying a percentage of net asset wealth. So why shouldn’t that include someone on a state pension living in their family home in London valued at a million pounds? They are free to downsize and release that cash so they also have ready access to their money.
Is that their only property? So, if they sell it, they are cash rich but homeless? I can understand your argument if they have more than one property but not if they own only one. They might need to stay in that property to access services which if they sell up and go to another cheaper property, they would find it harder. Not every situation is black and white. People downsize but there are obliged to pay those taxes. Why not just tax billionaires?
As Howie says “the difficulty is what is the definition of rich”.
If you only tax billionaires, how are 150 people going to transform our public services?
If you allow people to avoid the tax by buying a more expensive main home, more expensive homes will spring up to meet the new demand. There are already plenty in Mayfair going for over £100m.
Buying and selling property incurs tax anyway. 150 billionaires paying 2% raises 3 billion pounds minimum. Why are you and Howie so resistant to taxing the rich? Are you both in that category?
The UK spends over one thousand billion per year so 3 billion is an extra 0.3%.
I’m not against taxing the rich. I’m against false solutions and tokenism.
Any wealth tax must apply to millionaires which will include 25% of retirees.
Anyone lucky enough to own a million pound home outright, such as Mr Corbyn’s Islington pad, should expect to pay 2% of that value into government coffers or move to a property they can afford.
I’m fine with that. Why aren’t you?
My question related to ,”is that their only property “. People can be asset rich and cash poor.
The average person in the street will say that a millionaire is a wealthy person so any wealth tax should apply to them.
Being asset rich and cash poor is a choice. All assets can be sold. Why should someone with fifty million in the bank get to avoid this tax by buying a larger house?
They shouldn’t.
So how to decide. Effective tax laws should be simple and apply to everyone, not single out favourites or enemies for special treatment. The way to do that is have everyone make a wealth declaration each year, a bit like the voter registration form. Anyone with combined global assets of any sort valued at over £1m (less any debt) should pay 2% on the net wealth over £1m. So if they are worth £1.1m they’ll pay 2% on £100k, or £2000. That includes all property, shares, savings, pension pots. No exceptions. So your pensioner with a £1m home and no… Read more »
Sounds good. Now just a government with a back bone made out something stronger than straw to implement it.
Someone has to pay for the government of robber barons:
https://www.itv.com/watch/the-covid-contracts-follow-the-money/10a6572a0001B
The history of “government” is one of deception and delusion. People on average and below average earnings have always carried a disproportionate burden at the individual level. Starmer’s crew are no different.
The most shocking thing about that exposé is not that some political chancers and their mates took advantage of a national emergency, it’s that the civil service enabled them to spend more than most of Europe combined on Covid. Because that’s what happens when two thirds of senior Whitehall mandarins are from the private members education club and under stress only know how to trust the old boys network.