Chancellor Rachel Reeves has been criticised for what opponents describe as stealth tax rises in her Budget 2025, which included a freeze on income tax thresholds until 2028 and cuts to ISA allowances. The measures, aimed at raising revenue without increasing headline tax rates, drew sharp reactions from the Conservative shadow chancellor Mel Stride, who labelled the budget a 'tax trap' for working families.
The budget began with an unusual gaffe when the Office for Budget Responsibility’s assessment was accidentally published early, which Stride called 'outrageous'. Reeves acknowledged the error but defended her plans, pointing to a £22bn 'black hole' left by the previous government and arguing that the wealthiest would bear the largest burden.
Among the key stealth tax measures, the freeze on personal tax thresholds will drag more people into higher income tax bands, raising significant revenue without raising headline rates. Reeves admitted the move would 'affect working people' but argued it was necessary to balance the books.
From April 2029, a cap of £2,000 on pension contributions through salary sacrifice will be introduced, with contributions above that taxed as normal income. The OBR forecasts this will raise £4.7bn in additional national insurance contributions. Critics argue this could deter saving, while supporters point to fairness as pensioners do not pay national insurance.
Additionally, the annual ISA allowance will be cut from £20,000 to £12,000 from April 2027, a blow to savers. The government also announced a new 'mansion tax' from April 2028, imposing a £2,500 surcharge on properties worth over £2m and up to £7,500 for those over £5m, though analysts note this will raise relatively little revenue.
Reeves insisted there would be 'no return to austerity' and that the measures would fund public services, particularly the NHS. However, political analysts suggest the combination of threshold freezes and allowance cuts will lead to a higher tax burden for millions, potentially fuelling further criticism in the coming months.
