Chancellor Rachel Reeves has strongly indicated that an income tax increase is on the table for the upcoming November Budget, a move that would break a key Labour manifesto pledge.
Budget Warning for Millions of Households
Millions of households across the UK are being warned to prepare for major changes to their finances when the Chancellor delivers the Budget on November 26. The potential tax rise would deliver a fresh blow to families already grappling with the cost-of-living crisis.
Currently, everyone who earns over £12,570 pays income tax, with those earning more than £50,270 paying the higher 40% rate. A hike would mean millions more Britons paying more tax each month.
Breaking a Pledge to Raise Funds
The Chancellor is under pressure to raise funds to plug a financial black hole and secure investment for public services. In a telling interview with the BBC, Ms Reeves defended the potential U-turn, stating it would be possible to stick to manifesto commitments but that this would require "deep cuts in capital spending."
She added, "I have been very clear that we are looking at both taxes and spending. What I can promise now is I will always do what I think is right for our country, not the easy choice, but the thing that I think is necessary."
This shift in language has not gone unnoticed by financial experts. Nigel Green, CEO of deVere Group, commented: "It’s increasingly clear that the Government is preparing the public for an income tax hike. The language has shifted from reassurance to justification. The talk of ‘necessary choices’ and ‘doing what’s right for the country’ is political code for higher personal taxation."
A Politically Dangerous Move
Increasing income tax is a politically risky strategy for the Chancellor. The Labour Party had previously pledged not to increase the rates of income tax, National Insurance, or VAT. Breaking this promise so early in the parliamentary term is likely to face significant opposition and add to the growing pressure on the Government.
With the Budget announcement just weeks away, taxpayers earning above the personal allowance are being advised to brace for potential changes that could directly impact their take-home pay.
