Chancellor Rachel Reeves has not dismissed the possibility of an income tax increase in the upcoming Budget, raising questions about potential deviations from a key Labour election promise. Speculation arose following reports indicating that the Treasury is considering raising the income tax rate.
When pressed for comment, Reeves stated her commitment to supporting working individuals by maintaining low taxes. However, she refrained from providing definitive answers regarding specific tax measures before the Budget announcement, consistent with customary practice for Chancellors. This stance appears to contrast with earlier assertions that the Labour Party would uphold its manifesto commitments, which include a pledge not to raise income tax, National Insurance, or VAT.
The Labour manifesto for the 2024 general election explicitly states the intent not to increase any rate of income tax. This vow followed criticisms last autumn when the party announced a rise in National Insurance contributions for employers. In her recent comments, Reeves acknowledged the ongoing concern about living costs among the population while indicating that she is in the process of formulating the Budget.
Reeves has suggested a focus on wealthier individuals in the Budget, emphasizing that those with greater financial means should contribute fairly. Reports have emerged that discussions within the Treasury may also include potential tax increases on partnerships commonly utilized by legal and accounting professionals.
Economic analysis indicates that any such measures may not sufficiently address the estimated £22 billion shortfall in government finances. This gap has been exacerbated by adjustments to productivity forecasts from the Office for Budget Responsibility. In September, government borrowing reached £20.2 billion, marking the highest level for that month in five years.
If an income tax increase is implemented, it would represent the first rise in rates since 2010. As of now, income tax rates in England, Wales, and Northern Ireland remain unchanged since the 1970s, with current thresholds for basic and higher rates distinctly defined. Discussions reportedly include a potential one pence increase in the basic rate, which could generate significant revenue.
Source: https://www.bbc.com/news/articles/cgr4g89g1x8o?at_medium=RSS&at_campaign=rss