It said real disposable household incomes will fall by 2.2pc this year, equivalent to a £500 hit for the average adult.
Around one-third of this blow comes from taxes while the remainder comes from inflation.
Price rises are already at their highest in 30 years with steep increases in goods including petrol and food.
Inflation hit 6.2pc last month, its highest since 1992 with food and drinks up 5.1pc – a decade high – and petrol up almost 23pc.
The cost of filling up the tank has increased further since last month, with petrol routinely hitting new record highs this month.
Richard Hughes, chairman of the Office for Budget Responsibility, said: “The permanent cuts to National Insurance and income tax announced today reverse just over a quarter of the personal tax rises the Chancellor announced last year.”
“They reverse around one-sixth of total tax rises announced by this Chancellor since he came to office in February 2020.”
The Chancellor’s total haul from income tax will rise from £225bn this year to almost £300bn in five years’ time.
Over the same period national insurance, including the new health and social care levy, will jump from £158.1bn this year to £200bn in 2026-27.
Economists said it shows Mr Sunak is taking few steps to help, as he is pressing ahead with raising taxes to their highest level since the late 1940s.
Paul Johnson, director of the Institute for Fiscal Studies, said if the Chancellor “wants to be remembered as a tax reforming chancellor, so far he is headed in the wrong direction”.
The latest changes mean that those earning between £10,000 and £25,000 will pay less tax in the coming financial year, while those on higher salaries will pay more, according to the think-tank’s calculations.
But this is not enough to undo the Chancellor’s previous tax changes which few people will escape.
Mr Johnson said: “The freezing of the income tax personal allowance and higher rate threshold turn out to be much bigger tax rises than first intended.
“As a result, almost all workers will be paying more tax on their earnings in 2025 than they would have been paying without this parliament’s reforms to income tax and NICs, despite the tax cutting measures announced today.”
Economist Kallum Pickering at Berenberg Bank said voters should “not be fooled” by the Chancellor’s claims he is cutting taxes.
He said: “In contrast to his claims that he is lowering the UK tax burden, the Chancellor unveiled a conservative fiscal plan that will raise the UK tax burden to its highest level since 1949.”
Carys Roberts, executive director at the Institute for Public Policy Studies, called the proposals “woefully out of touch with the reality facing millions of families, who face being pulled into poverty and debt.”
She said: “We’re going into the biggest incomes squeeze in a generation and yet the Chancellor hasn’t offered the help that many households need.”
Torsten Bell, chief executive of the Resolution Foundation think tank, said Mr Sunak was increasing the tax burden even as the public finances improved thanks to the stronger-than-expected economic recovery from Covid.
He said: “It’s hard to overstate the scale of the cost of living crisis coming, with the year ahead bringing the highest inflation in 40 years and the worst income squeeze on record. But while our household finances are being hammered, the public finances have actually improved.
“The Chancellor announced a bigger package of measures than expected, but it was a badly designed one with almost no new support for the poorest households. Higher earners will be hardest hit by tax rises, but it makes no sense to raise National Insurance while cutting Income Tax – 21st Century Britain doesn’t need to do more to make things harder for workers, and easier for landlords.”
