Labour has been dealing with a challenging financial situation inherited from the previous Conservative government, leading to speculation about potential tax increases and spending cuts under Chancellor Rachel Reeves. The upcoming Budget on November 26 will likely bring discussions on various tax measures that could impact the public.
Experts suggest that one likely option for the Chancellor is extending the freeze on income tax and national insurance thresholds. This move could result in millions more people being subject to income tax, including higher-rate taxpayers. While Rachel Reeves has expressed concerns about the impact on working individuals, Prime Minister Keir Starmer has not ruled out the extension.
The possibility of raising the 45% tax rate to 50% is also under consideration, with projections indicating potential revenue gains. However, uncertainties remain about the effectiveness of such changes, as highlighted by the Institute for Fiscal Studies.
Fuel duty freeze, which has been in place since 2011, is another area of focus. While it currently stands at 52.95p per litre for petrol and diesel, discussions are ongoing about its future trajectory and potential revenue implications for the Treasury.
There is growing momentum for a wealth tax, with proposals for a 2% levy on assets over £10 million to generate additional government revenue. However, Rachel Reeves has previously dismissed the idea, emphasizing the government’s existing tax strategies targeting wealthier individuals.
Further potential changes may include revising stamp duty and property taxes, with considerations for a new property tax on high-value homes and adjustments to capital gains tax exemptions. The government is also exploring alterations to inheritance tax rules and pension contributions to enhance revenue streams.
Financial institutions, particularly banks, could face heightened scrutiny, with proposals for increased surcharges to boost government coffers. Similarly, gambling firms are bracing for potential tax hikes to address social issues like child poverty, highlighting the broader fiscal landscape under review ahead of the Budget announcement.
