Bombshell Signal: Rachel Reeves Plans to Increase Income Tax in Budget
Rachel Reeves has reportedly informed the Office for Budget Responsibility (OBR) that she plans to raise income tax in her statement on November 26. This marks the clearest indication yet of the Chancellor's intentions.
According to reports, the Chancellor has indicated that an increase in personal taxation is among the "major measures" under consideration. Reeves is said to be contemplating a 2p rise in income tax, paired with a 2p reduction in national insurance contributions.
Tax Changes Under Consideration
- The national insurance cut would apply only to earners below £50,270, lowering the rate from 8% to 6%.
- Higher earners, those above £50,270, would not receive this reduction.
- This approach appears aimed at shifting the tax burden away from workers toward groups such as pensioners and landlords.
Although these plans are not confirmed and could still be revised, submission to the OBR strongly suggests a possible break with the manifesto pledge against raising income tax. The OBR is expected to release its assessment of the tax hike's impact next week.
Political Response
Deputy Labour leader Lucy Powell, recently elected to succeed Angela Rayner, cautioned Reeves against reneging on Labour's manifesto commitments, including the promise to avoid increasing income tax.
This development signals a potential shift in Labour's tax policy ahead of the upcoming Budget statement, with significant implications for taxpayers and political dynamics.
Author's summary: Rachel Reeves’ reported plans to raise income tax and cut national insurance contrast with Labour’s manifesto pledge, indicating a possible major policy shift in the upcoming Budget.