If you have wondered why your payslip looks thinner this year, the OECD has just given you the answer. Britain's tax wedge — the share of your earnings the state takes before you ever see them — rose by 2.45 percentage points in 2025 to 32.4%. That is one of the sharpest annual jumps recorded for any developed economy. And it happened on Labour's watch.
The Quiet Confiscation of British Pay
Headline tax rates have barely moved. The Chancellor wants you to believe nothing has changed. It has. Frozen thresholds, dragged-down personal allowances, and stealth National Insurance changes have done the heavy lifting. The result is the same: working people earning the same money in real terms are paying significantly more tax than they were eighteen months ago.
The OECD's measure includes income tax, employee National Insurance, and the employer NIC that hammers wages indirectly. That last figure matters. Every pound an employer hands over to HMRC is a pound that does not go into a wage rise or a new hire. That is why pay growth has fallen to a five-year low while inflation refuses to die.
How Britain Got Worse Than Average
For years, the United Kingdom sat below the OECD average on this metric. It was one of the few competitive things we had left. That advantage is gone. Britain is now closing the gap with the high-tax economies of continental Europe — not because they have got cheaper, but because we have got more expensive.
This is what happens when a government refuses to tackle spending and instead reaches into your pocket. The two-child benefit cap was kept in place, then quietly weakened. Winter Fuel Payments were stripped from pensioners. Public sector pay deals were signed off without a serious productivity conversation. Somebody has to pay for all of that. That somebody is you.
The Productivity Trap
Higher tax wedges do not just hurt take-home pay. They destroy the incentive to work harder, take a promotion, or set up a business. Why bother grafting for an extra hour when the marginal pound is taxed at over 40% once you factor in NI and the employer side?
This is the productivity trap Britain has been stuck in for the best part of a decade. Labour has not loosened the trap — they have tightened it. The result is the GDP figures we have already covered on this site: an economy that is flatlining because the people doing the work are punished, and the people running the country don't seem to notice.
What Reform UK Would Do
Reform UK would lift the income tax threshold to £20,000. That single change would take millions of the lowest-paid workers out of income tax altogether and let working families keep more of what they earn. We would scrap the punitive employer National Insurance hike that Labour pushed through in their first Budget — a move the OECD figures show is now bleeding directly into stagnant wage growth.
We would also commit to no new stealth taxes. No more frozen thresholds. No more pretending that hiding the rise makes the rise smaller. If a government wants more of your money, it should have the courage to put it on the tin.
British workers do not need lectures about "contribution." They need a government that respects the money they earn. The OECD has just confirmed what every payslip in the country already shows: under Labour, work is being punished. Reform UK would change that.