From the US’s shifting tariffs to the UK’s new support for side hustlers, the rise in higher-rate taxpayers, and the nation’s leadership in AI adoption, this week’s stories highlight key trends shaping both domestic and global economies. Read on for a look into the latest developments.
Global Economy
Trump's Tariffs Reshape Global Trade
- The Trump administration's aggressive tariff policies are overhauling decades of free-trade agreements, impacting allies and rivals alike.
- The latest wave includes a 25% tariff on steel and aluminium imports from all countries, with threats to hike Canadian tariffs to 50%, later withdrawn after Canada suspended a tax on US-bound electricity.
- The European Union retaliated with $28 billion in counter-tariffs on US goods in April, further escalating tensions. Trump, in response, has warned of additional levies targeting specific European industries.
- Canada and Mexico were hit with 25% tariffs on March 4, but the US temporarily paused duties on goods compliant with the USMCA until April 2. However, Trump is considering new reciprocal tariffs on Canadian lumber and dairy, while Canada has already responded with $20 billion in new duties on US goods.
- China's trade war with the US has also deepened as Trump imposed an additional 20% blanket tariff on top of existing 10% duties. China hit back with up to 15% tariffs on US farm products, such as chicken and pork, starting March 10.
- The introduction of tariffs has been met with strong resistance by all involved, sparking trade wars across multiple sectors. In the coming months, it will be interesting to see which nations gain the upper hand in key industries—we’ll keep you updated as the situation unfolds.
UK Tax
UK Side Hustlers Get a Tax Break
- The government has announced a major tax break for thousands of people running side hustles, raising the self-assessment threshold from £1,000 to £3,000. The change, which Labour says will take effect within this parliament, will spare an estimated 300,000 individuals from filing tax returns.
- Additionally, around 90,000 people will pay no tax at all under the new rule, while others will be able to settle their dues via a streamlined online service, significantly reducing administrative burdens.
- The move is part of a broader HMRC modernisation push. Treasury exchequer secretary James Murray emphasises that it will “allow Brits to make the very most of their entrepreneurial spirit.” By removing tax return obligations, the government hopes to free up time for individuals to expand their ventures.
- Online marketplaces like Vinted and Depop have been required to share sellers’ data with HMRC, a step toward digital transparency. Meanwhile, HMRC is learning from private-sector giants like Barclays and John Lewis to modernise tax collection, incorporating generative AI and 'test and learn' strategies.
- “From trading old games to creating content on social media, we are changing the way HMRC works to make it easier for Brits to make the very most of their entrepreneurial spirit. “Taking hundreds of thousands of people out of filing tax returns means less time filling out forms and more time for them to grow their side hustle,” said James Murray, exchequer secretary to the Treasury.
Higher-Rate Taxpayers Soar Past Five Million
- A record 5.1 million UK workers are now paying the higher 40% tax rate, a sharp 15% increase from the previous year. The policy, driven by frozen tax thresholds and inflation, means even middle-income earners are being pulled into higher tax bands.
- An additional 680,000 people entered the 40% bracket in the past year alone, and experts warn this is just the start. By 2028, the number of higher-rate taxpayers could hit nine million, with some estimates suggesting it could even reach ten million by the decade’s end.
- The tax freeze, first implemented by Rishi Sunak in 2021 to recover pandemic costs, was extended by Jeremy Hunt until 2028. Normally, tax brackets rise with inflation, but keeping them static results in ‘fiscal drag’—pulling more people into higher tax bands as wages increase.
- Chancellor Rachel Reeves faces pressure to lift the freeze in her upcoming mini-budget, but financial constraints may force her to extend it, despite warnings that the policy discourages hard work and economic growth.
- The burden extends beyond income tax, with 600,000 people now paying the 45% additional rate on earnings over £125,140. “Frozen thresholds and high inflation mean even many struggling households are now being hit with higher tax rates,” said Darwin Friend of the TaxPayers’ Alliance.
- With fiscal drag becoming an increasing concern for many UK taxpayers, it’s more important than ever to explore strategies to reduce your income tax bill. Options such as salary sacrifice schemes, tax-efficient investments, and maximising pension contributions can help you manage your tax liability more effectively.
- GCV’s tax-efficient investing guide details numerous methods UK tax payers can take advantage of to reduce their tax bill.
AI
UK CEOs Lead AI Adoption as EU Struggles with Regulation
- UK businesses are racing ahead in AI adoption compared to their European counterparts, where regulatory uncertainty is slowing progress. A report from AI platform Dataiku found that just 26% of UK CEOs delayed AI projects due to unclear rules, compared to 59% in France.
- UK firms are taking a structured approach, with 23% of CEOs having formal AI roadmaps for the year ahead—almost double the global average of 12%. German businesses, in contrast, are lagging, with only 5% of CEOs outlining AI plans.
- The EU’s AI Act, the most comprehensive AI regulation to date, seems to have raised more questions than answers, making businesses hesitant to invest. In contrast, UK companies benefit from a more flexible regulatory environment, which has encouraged rapid innovation.
- The UK government has also distanced itself from international AI agreements, arguing that they lack clarity on governance and security concerns. The US has taken a similar stance, with Vice President JD Vance warning that overregulation could stifle innovation.
- Business leaders caution that while fewer restrictions help AI progress, ethical and responsible implementation must remain a priority. “When CEOs have confidence in compliance and control over governance, they can move faster, scale smarter, and fully capitalize on AI’s potential,” said Florian Douetteau, CEO of Dataiku.
Final Note
From reshaping global trade dynamics with shifting tariff policies to the UK government's latest initiatives to support side hustlers, this week's stories highlight key developments that could influence economic landscapes both domestically and internationally.
As taxpayers face the impact of being pushed into higher tax bands, the long-term effects of the UK's frozen tax thresholds will be closely monitored, particularly by higher-rate taxpayers. Meanwhile, the rapid pace of AI adoption in the UK contrasts with the regulatory hurdles the EU is facing, potentially positioning the UK for increased productivity.
Next week’s briefing will include the Bank of England's rate decision, which is expected to remain unchanged, providing the insights you need to navigate this turbulent economic environment.