Rachel Reeves has proposed tax increases in her latest Budget, acknowledging that “ordinary people” will face higher taxes in the coming years. She emphasized the importance of having those with more financial capacity contribute more. In addition to tax increases, the Budget includes measures aimed at alleviating the cost of living, such as freezing rail fares in England, maintaining fuel duty rates, and reducing some domestic electricity costs.
The government anticipates that eliminating the two-child limit on benefits will significantly decrease child poverty, projecting a reduction of 450,000 children living in relative poverty by the end of the parliamentary term and an increase in average incomes for affected families by approximately £5,310 annually.
The Budget’s overall financial impact will vary by household. For example, a low-income individual without more than two children may not gain from the removal of the two-child benefit cap, while a modest-income driver of an electric vehicle may be impacted by new mileage charges. Conversely, households with higher incomes may find the measures designed to tackle cost-of-living issues more beneficial.
Analysis from the Resolution Foundation suggests that lower-income households are more likely to benefit financially from the proposed changes, while higher-income households may experience losses. Notably, pensioner households are projected to gain more than working-age families from these budgetary measures.
Specific tax increases, such as a new high-value council tax surcharge and raised rates on property and capital income, are expected to predominantly impact higher-income individuals. The Treasury estimates that by 2028-29, the proposed tax measures will reduce the income of the top 10% of earners by an average of £2,000, while middle earners and the lowest 20% would see smaller decreases.
Overall, the effectiveness of these measures will depend on broader economic conditions, as the Office for Budget Responsibility forecasts modest growth in average real household disposable income over the next parliamentary term.
Source: https://www.bbc.com/news/articles/cwyx4zpp0n0o?at_medium=RSS&at_campaign=rss