UK government debt is a topic many people gloss over, assuming it doesn’t really affect them. But it does, because ultimately, someone has to pay for it. That someone is the taxpayer. This article looks at the latest borrowing figures, what the debt is costing in interest, the six areas where higher taxes may be on the way, and why increasing taxes can end up backfiring.
£3 Trillion Debt and August Borrowing Overshoot
The UK government debt currently stands at roughly £3 trillion. What has alarmed the government in the latest numbers is the amount it needed to borrow in August to cover the gap between spending and income:
| August borrowing | Amount |
|---|---|
| Expected | £14.8–£15.5 billion |
| Actual (approx.) | £18.3 billion |
| Overshoot (approx.) | ~£2.8 billion more than expected |
That’s for a single month. The concern is that the government is running out of people willing to lend to it, and that means the burden falls back on taxpayers.
£110 Billion a Year in Interest
The cost of servicing this debt is enormous. With bank interest rates at around 3.75%, and the average rate on the £3 trillion debt assumed to be somewhere around 3% or slightly above as it renews, the UK is paying roughly £110 billion a year in interest.
Put simply, that money isn’t buying anything new — it’s interest on spending that has already been consumed. That can’t continue indefinitely, and if the government can’t find the money elsewhere, the result is higher taxes.
How the Government Could Raise Taxes: 6 Areas to Watch
Based on current discussion, these are the six main areas where higher taxes look most likely:
1. Property Taxation
Property taxes look set to rise further, with the government appearing to believe there’s more to be taken here. Areas mentioned include Stamp Duty Land Tax and Capital Gains Tax on property, alongside property income tax, which is already going up.
2. Wealth Taxes
Wealth taxes appear to be on the table, but they don’t tend to work in practice — people get wiser, move, and take their assets with them where they can, or sell and invest in other countries instead.
3. Income Tax and Frozen Thresholds
Income tax has already been attacked despite earlier assurances, with increases to certain types of income including savings, property, and dividends. Thresholds are another pressure point: the personal allowance has been stuck at £12,570 for some time, and many people are feeling the pinch. It’s unlikely that can continue indefinitely given the pressure on public finances.
4. Pensions
Inheritance Tax on pensions is already due to come in from April 2027. The worry is that the government may also reduce the tax reliefs that currently encourage people to pay into pensions. That would undermine future retirement and wealth planning – after all, why would people pay into a pension if the money is taxed heavily and they can’t use it?
5. Capital Gains Tax
There is talk of equalising Capital Gains Tax with income tax. As you can see in the video, most economists have said this doesn’t work in reality, because people simply stop selling their assets – meaning the government ends up collecting less, not more.
6. The “Mansion Tax”
A separate high-value property surcharge, often called the mansion tax, was initially proposed at £2 million, but there are suggestions the threshold could be reduced to £1.5 million. This could be particularly damaging for people living in the south of England, whose homes may be modest relative to local prices but still exceed the threshold and attract the surcharge.
Why Higher Taxes Backfire: 69,300 Taxpayers Left the UK
The key problem with raising taxes repeatedly is that the tax base (the people actually paying) shrinks as they move or change their behaviour. This is now showing up in the data: HMRC has reportedly seen 69,300 taxpayers submit a P85 in 2025/26. The P85 is the form used when leaving the country if you’re not already in self assessment. The question is why a number this large isn’t being publicised more, as it suggests the strategy of raising taxes isn’t working.
The pattern of how people respond to higher taxes is consistent across each area:
- Property and wealth taxes: people don’t sell, don’t move, or leave the country.
- Income taxes: people cut their hours or find other ways to earn, and the black economy grows.
- Pensions: people stop investing in their future retirement, putting more burden on the state.
- Capital Gains Tax: people stop buying assets in the UK, leave, or hold on and don’t sell.
- Mansion tax: fewer people want to own higher-value property, which hits the wider economy.
On property specifically, rising house prices are partly a monetary effect (the result of money printing) rather than a genuine increase in value. More people are then hurt by the taxes attached to owning property, so fewer are willing to own it. This could lead to a plateau where people stop buying above a certain value, which in turn hits the UK economy again. The result is a vicious cycle, with the presenter describing the government as pouring oil on a fire.
Final Thoughts: UK Debt Is Everyone’s Problem
With roughly £3 trillion of debt, an August borrowing overshoot, and £110 billion a year going on interest alone, the pressure on the UK’s public finances is real. The most likely outcome is higher taxes across property, wealth, income, pensions, capital gains, and high-value homes. Understanding where these pressures are coming from is the first step to defending against them, which is why it pays to stay informed about the UK business and property tax system and plan ahead.
Plan Ahead of Tax Rises with GoldHouse Accounting
If higher taxes are coming on property, pensions, capital gains, and wealth, the time to plan is before they arrive – not after. At GoldHouse Accounting, our tax advisors and wealth management consultants help business owners and property investors understand where the pressure points are and put legitimate, tax-efficient strategies in place. Get in touch to find out how to protect your position.
This article reflects the presenter’s personal views and analysis based on figures and proposals as stated at the time of recording. Figures are approximate, and the possible tax changes discussed have not been confirmed as government policy. This is not personalised tax or financial advice — speak to a qualified tax advisor about how any changes could affect your specific circumstances.
