The Chancellor could hit people trying to buy a home or paying in to a pension.
Rachel Reeves outlines likelihood of tax rises in October
Rachel Reeves could impose tax hikes of up to £130 billion in a bombshell budget, new analysis has warned.
The Chancellor’s statement on October 30 threatens to be “a real horrorshow for taxpayers” as Labour seizes cash to fund pay rises for public sector workers and projects including a state-owned energy company.
Labour’s election manifesto and policies inherited from the last Government mean taxes will rise by almost £40 billion but Ms Reeves has already indicated she will go further, saying the Budget will include “difficult decisions on tax, on spending, and on welfare.”
The Government is to raise £1.5 billion from applying VAT and removing business rate relief from private schools and £1.2 billion from extending the energy profits levy, a windfall tax imposed on energy firms after prices shot up following the Ukraine war. Taxes on non-doms, foreigners buying property in the UK and fund managers will also rise.
Ms Reeves is also expected to raise around £9.2 billion by allowing a number of temporary tax cuts to come to an end. Ending the freeze on fuel duty is set to raise £4.8 billion from motorists while another £2.6 billion will come from allowing cuts to business rates introduced during the Covid
The Chancellor is also expected to press ahead with plans drawn up by the last Tory Government to freeze income tax and National Insurance thresholds – which is an effective increase, due to inflation.
According to Treasury watchdog the Office for Budget Responsibility, this is the equivalent of putting up the basic rate of income tax by 4p and will raise an extra £26.7 billion in the 2025-26 financial year.
It means the Budget is set to add £39.74 billion to the annual tax bill just from measures that are already known about.
However Ms Reeves is also considering introducing new taxes. Options include capping up-front tax relief on pension contributions at 20 percent, increasing tax by £1.5 billion on higher earners who save into a pension.
Ending the 25 percent tax free sum on withdrawals from many pension funds would raise another £5.5 billion at the expense of pensioners.
Making employers pay National Insurance on pension contributions would raise £9 billion and making more family homes liable for inheritance tax would raise £2 billion.
The Chancellor is also thought to be planning changes to capital gains tax which could raise £8 billion.
In total these measures would mean tax hikes of almost £80 billion.
Ms Reeves is also under pressure to introduce a wealth tax, after the party’s annual conference last month voted for plans drawn up by trade union Unite. If the Chancellor accepts the union’s demands, it is likely to mean an additional one-off tax of £50 billion.
Elliot Keck, head of campaigns at the TaxPayers’ Alliance, said: “The upcoming budget is threatening to be a real horror show for taxpayers.
“With significant tax rises already baked in, households will fear that things can only get worse given the enormous pressure being placed on the chancellor to raise revenues through a tax grab on workers, families and businesses.
“Labour should show their commitment to growth and to easing the burdens on the British people and stand firm against the demands to hike taxes.”
Labour Chancellor Rachel Reeves claims the previous Government left a £22 billion “black hole” in the public finances which will require “difficult decisions”.
Speaking at Labour’s annual conference last month, she insisted: “Because of that legacy left by the Conservatives, the road ahead is steeper and harder than we expected.”
