Is UK government debt really going to hit 300% of GDP?

Almost certainly not, and the OBR says so itself. The July 2026 report projects debt rising from just under 100% of GDP in 2030-31 to around 300% by 2075-76 under its baseline, but it stresses these are scenarios rather than forecasts, because it is close to certain that future governments will act long before debt reaches those levels. The value of the projection is not the end number. It is the statement that, in nearly all scenarios explored, debt moves onto an unsustainable and ever-rising path — which tells you what pressure every Budget between now and then gets written under.

What does a 50-year fiscal projection have to do with my business next year?

Directly, nothing. Indirectly, it sets the backdrop for tax policy. A government facing that projection is looking for revenue rather than looking for room to hand it back, and that shows up as rates, thresholds, allowances and reliefs moving in one direction over time. You cannot plan for a specific measure that has not been announced. You can make sure your business has enough headroom that a change of a few percentage points in costs or taxes is an inconvenience rather than a crisis, which is a calculation you can run this week.

How do I work out my break-even point and margin of safety?

Break-even turnover is your fixed overheads divided by your gross margin percentage. On £168,000 of overheads at a 45% gross margin, that is £168,000 ÷ 0.45 = £373,333. Your margin of safety is how far above break-even you actually trade, as a percentage of turnover: on £480,000 of sales that is (£480,000 − £373,333) ÷ £480,000 = 22.2%. Then re-run it with overheads 5% higher and gross margin a point lower, and see what the safety figure becomes. That second number is the one worth acting on.

Is it better to chase more sales or improve margin?

Margin, almost always, because it carries no additional cost. On £480,000 of turnover, one extra percentage point of gross margin is £4,800 dropping straight to profit. One extra percent of turnover at a 45% margin is £4,800 of sales producing only £2,160 of gross profit, and it brings delivery cost and working capital with it. To replace the profit lost from a single point of margin you would need to sell about 2.2% more. Pricing is usually the cheapest lever available and usually the last one an owner pulls.

Why is my effective Corporation Tax rate higher than 25% on some profit?

Because of how marginal relief works. The small profits rate is 19% up to £50,000 and the main rate is 25% from £250,000, with relief tapering between the two at a fraction of 3/200. The result is an effective marginal rate of 26.5% on profit inside that band — higher than the headline main rate. On £150,000 of profit the bill is £36,000, an average rate of 24%, but the next pound earned is taxed at 26.5p. That makes the band the most valuable place to time capital spend or employer pension contributions.

Can Buzz advise me on my pension given what the report says about the triple lock?

Not directly, and it matters that we are clear about it. Buzz Accounting Ltd is an accountancy practice, not a regulated financial adviser, so we do not give advice on pensions, protection or investments. Where a question is about your personal financial position rather than your company's, we introduce you to Equity & General, authorised and regulated by the Financial Conduct Authority under FCA number 474163, and the regulated advice comes from them. What we can do is the company side: the profit extraction, the Corporation Tax timing and the affordability of employer contributions.

The OBR fiscal risks report: plan, don't panic

Reacting to: The devastating prognosis for the UK's public finances (City A.M.) → — and to the underlying OBR Fiscal risks and sustainability report, July 2026.

The Office for Budget Responsibility published its Fiscal risks and sustainability report on 7 July 2026, and the coverage has been uniformly grim. The headline projection: under the OBR's baseline, public sector net debt goes from just under 100% of GDP in 2030-31 to around 300% of GDP by 2075-76. In the higher-productivity scenario debt still ends about 120 percentage points of GDP above where it starts. In the lower-productivity scenario with shocks, it rises more than two and a half times faster than the baseline. The OBR's own summary: "In nearly all of the scenarios we explore, debt eventually moves onto an unsustainable and ever-rising path."

Two of the drivers are named directly. The state pension triple lock, which the OBR assumes continues in the absence of a stated alternative, takes state pension spending from about 5% of GDP in 2030-31 to roughly 9% by 2075-76 — against about 7% if pensions were uprated with earnings instead. And the shift to net zero erodes motoring revenue: fuel duty falls from 1.6% of GDP in 2030-31 to 0.5% by 2075-76, which is around three quarters of the net-zero-related revenue decline, with electric vehicle excise duty clawing back roughly a quarter of it.

What this report is, and what it is not

Be honest about the document. It is a 50-year sustainability projection, not a forecast of your next quarter. The OBR says explicitly that these scenarios should not be read as forecasts, because it is almost certain that future governments will act to prevent them. Debt does not actually reach 300% of GDP; something changes long before that.

That is precisely the point for a business owner. The report is not telling you what happens to the public finances. It is telling you what pressure every Budget between now and then will be written under. The backdrop is a government looking for revenue rather than looking for room to give it away, for as far ahead as anyone is projecting. Whatever form that takes — rates, thresholds, allowances, reliefs — the businesses that absorb it comfortably are the ones with headroom in their numbers, not the ones running close to the line.

So the useful response is not to change anything because of a 2075 projection. It is to know, today, how much room you actually have.

Headroom, calculated

Headroom has a formula, and most owners have never run it on their own business. It is your margin of safety: how far turnover can fall before you stop making money.

An illustrative set of figures for a small trading company:

Turnover: £480,000
Gross margin: 45%, so gross profit of £216,000
Fixed overheads: £168,000
Operating profit: £48,000

Break-even turnover is fixed overheads divided by gross margin percentage: £168,000 ÷ 0.45 = £373,333. The margin of safety is the gap between that and actual turnover, as a percentage of turnover: (£480,000 − £373,333) ÷ £480,000 = 22.2%. Turnover can fall by a fifth before this business is working for nothing.

Now stress it. Suppose overheads rise 4% — wages, rates, insurance, software, the ordinary drift. Fixed overheads become £174,720. Break-even moves to £174,720 ÷ 0.45 = £388,267, and the margin of safety falls to 19.1%. A 4% cost increase has eaten just over three percentage points of safety, and £6,720 of profit — 14% of the operating profit — without a single sale being lost.

That is the whole argument in one calculation. A business at 22% margin of safety takes a bad year on the chin. A business at 5% does not.

Where a point of margin beats a point of sales

The same figures show where the leverage sits, and it is rarely where owners look first.

One extra percentage point of gross margin on £480,000 of turnover is £4,800 — straight to profit, because no extra cost comes with it. That is 10% of the operating profit from a 1p-in-the-pound price or buying improvement.
One extra percent of turnover at the existing 45% margin is £4,800 of sales producing £2,160 of gross profit — less than half as much, and it comes with delivery cost and working capital.

Put differently: to replace the profit lost from a single point of margin, you need to sell 2.2% more. Pricing is the cheapest lever in the business and usually the last one anyone pulls. Our post on how to price for profit works through that in detail.

The tax side of headroom

Two numbers are worth knowing precisely, because they decide what a marginal pound of profit is actually worth.

Corporation Tax. The main rate is 25% and the small profits rate is 19% on profits up to £50,000. Between £50,000 and £250,000 marginal relief applies at a fraction of 3/200, which produces an effective marginal rate of 26.5% — higher than the headline main rate. On £150,000 of profit the sum is 25% of £150,000 = £37,500, less marginal relief of (£250,000 − £150,000) × 3/200 = £1,500, giving £36,000, an effective rate of 24%. But the next pound of profit is taxed at 26.5p. If you are planning capital spend or pension contributions, that band is where the timing decision earns most.

Employer National Insurance. Class 1 secondary contributions run at 15% on earnings above a £5,000 secondary threshold, with the Employment Allowance at £10,500. A single £35,000 salary costs (£35,000 − £5,000) × 15% = £4,500 in employer NIC before the allowance. Payroll is the largest fixed overhead in most small companies, which is why a hiring decision moves the break-even figure more than anything else on the list.

Four things to do this quarter

Calculate your break-even and margin of safety using the two lines above. It takes ten minutes with a set of management accounts and it is the single most useful number about your business.
Re-run it with overheads 5% higher and gross margin one point lower. If the answer frightens you, that is the finding, not the failure.
Check where your profit sits against the £50,000 and £250,000 Corporation Tax thresholds before your year end, not after it. In the marginal band the next pound costs 26.5p.
Forecast cash, not just profit, for the next 13 weeks. Profitable businesses fail on timing. Our post on how to read a cashflow forecast covers what to look at.

The point of all this

Nobody needs to restructure a business around a 50-year debt projection. But a report saying the fiscal path is unsustainable in nearly every scenario is a reasonable prompt to find out how much room you have, because the answer takes an afternoon and most owners do not know it.

That is the core of what we do through management accounts and business planning — current numbers, regularly, so a change in the weather is something you see coming rather than something that lands on you. If cash is the pressure point rather than profit, cashflow and budgeting is the place to start.

One boundary worth stating plainly: everything above is business planning, not personal financial advice. Buzz Accounting Ltd is an accountancy practice, not a regulated financial adviser. Where a question is about your own pension, protection or investments — including anything prompted by what the OBR says about the triple lock — we introduce you to Equity & General, which is authorised and regulated by the Financial Conduct Authority under FCA number 474163, and the regulated advice comes from them.

The OBR's "most alarming yet" report is a reason to plan, not panic