Rachel Reeves has confirmed she will not increase income tax or National Insurance rates in this month's Budget, abandoning a manifesto-busting plan that would have marked the first such rise since 1975. The Chancellor is instead exploring other revenue-raising measures to generate between £20bn and £30bn, aiming to repair public finances and build headroom against her fiscal rules.
Among the options under consideration is freezing income tax thresholds, which would drag more people into higher tax brackets as wages rise. This could raise several billion pounds, though it would effectively increase the tax burden without raising rates. Another possibility is reforming capital gains tax, potentially aligning it more closely with income tax rates or reducing the annual exemption amount.
Reeves is also expected to target pension tax relief and inheritance tax reforms. A £7.5bn tax rise has been planned, with details to be announced on 26 November. The Chancellor adopted strict fiscal rules last year, limiting her ability to borrow for day-to-day spending, making tax rises necessary to meet her targets.
Critics argue that freezing thresholds and reforming capital gains tax could discourage investment and hit savers, while supporters say it is a fairer way to raise revenue without directly increasing taxes on workers. The Budget will be closely watched for the final mix of measures as Reeves seeks to balance economic growth with fiscal responsibility.
