Rachel Reeves Proposes £40 Billion Tax Increase for November Budget

Post by : Bianca Suleiman

UK Finance Minister Rachel Reeves is preparing to disclose a major tax reform in her budget set for November 26, targeting an increase of up to £30 billion each year to fulfill fiscal objectives and bolster market trust. This strategy follows the escalation of government borrowing expenses and the cancellation of a proposed £5 billion welfare savings initiative.

Despite her prior assurances against increasing income tax, VAT, or national insurance for 'working individuals,' Reeves is evaluating the possibility of extending the freeze on income tax thresholds until 2030, which could generate an additional £8 billion. Furthermore, she is considering a one-percentage-point increase in the primary income tax rate, projected to yield another £8 billion.

Although Reeves has excluded the introduction of a new wealth tax, she has suggested that higher taxes impacting the affluent will feature in the budget, potentially raising taxes on capital gains and various income streams.

Modifications to property taxes are also on the table, potentially leading to increased rates for high-value property owners while lowering stamp duty. Changes related to pensions may involve taxing employer contributions or adjusting the 25% tax-free amount individuals can withdraw from their pensions.

Additionally, other proposals include launching a tax aimed at funding specific expenditure areas such as public health and revising VAT practices by eliminating lower or zero rates applicable to certain items. However, these adjustments might contribute to rising inflation, noted as the highest within the G7 nations.

Reeves is also assessing the possibility of implementing elevated taxes on banks to regain some of the multi-billion-pound interest that lenders have earned on reserves at the Bank of England. Nonetheless, such actions could impede lending capabilities and hinder economic growth.

The forthcoming budget is expected to be one of the most critical in recent history, with Reeves seeking a balance between fiscal accountability and the necessity for economic stimulation. The government's strategy will be closely monitored by both markets and the public.