Rachel Reeves is under pressure to raise taxes and cut spending to plug a £10 billion gap in the public finances or risk breaking her own borrowing rules.
The Chancellor is considering extending the freeze on income tax thresholds, potentially pushing an additional one million workers into the 40% tax bracket. This move, originating with Rishi Sunak's 2021 freeze, has already added 680,000 to the higher rate in 2023. Extending the freeze could bring the total number of 40% taxpayers to ten million, raising £10 billion annually, with further increases in those paying income tax for the first time. Experts predict stealth tax rises are likely due to economic pressures and increased defence spending.
