Auto Amazon Links: No products found. Blocked by captcha.
Chancellor Rachel Reeves has confirmed that she will not be increasing income tax rates in the upcoming Budget, despite earlier indications suggesting otherwise. This decision marks a departure from what many had anticipated, particularly given the Labour Party’s manifesto commitment not to raise the basic, higher, or additional rates of income tax. Recent economic forecasts showing better-than-expected outcomes have influenced this choice, as first reported by the Financial Times.
While income tax rates will remain unchanged, other financial measures could be introduced to address public finances. These may include freezing or lowering the thresholds at which income tax rates apply, effectively bringing more earners into the tax net as salaries rise. Different tax hikes are also being considered by the Treasury as part of the government’s broader plan to manage a public finance gap estimated at around £20 billion.
Government officials emphasize that difficult decisions are still unavoidable and maintain that this change in direction is unrelated to the recent uncertainty surrounding the prime minister’s position. Ahead of every Budget, proposals are submitted to the Office for Budget Responsibility (OBR) for analysis to forecast the government’s spending and economic growth prospects. The latest Budget plans reached the OBR last week, and government borrowing costs initially rose following speculation about possible income tax increases, but then eased after reports suggested the financial shortfall was smaller than expected.
Despite months of hints toward raising income tax, including a pre-Budget speech by Reeves warning of necessary sacrifices, the Chancellor appears to be looking for alternative methods to raise revenue. Options under consideration include continuing the freeze on income tax and National Insurance thresholds, a policy implemented in April 2023 and initially set to last until 2028. Extending this freeze could bring in an additional £8.3 billion annually, as per estimates from the Institute for Fiscal Studies. Other proposals reportedly under review include new taxes on electric vehicles and increased levies on gambling companies.
Labour’s 2024 general election manifesto explicitly commits to not increasing taxes on working people, including National Insurance, income tax rates, or VAT. This decision to avoid increasing income tax rates aligns with those promises, which Labour leaders have stressed must be honored. Deputy leader Lucy Powell stated that it is crucial to stand by the party’s election commitments, while Health Secretary Wes Streeting acknowledged the difficult financial situation but urged avoiding speculation ahead of the Budget. Opposition voices have reacted strongly to the developments; Conservative MP Kemi Badenoch criticized the government for what she described as a Budget built on “broken promises,” and Liberal Democrat spokesperson Daisy Cooper welcomed the potential U-turn as a relief for families. The SNP’s Shirley-Anne Somerville meanwhile described the UK government as being in “complete disarray.” A Treasury spokesperson declined to comment on tax speculation outside of official fiscal announcements but affirmed that the Chancellor aims to deliver a Budget with “fair choices” to build a secure future for Britain
Read the full article from The BBC here: Read More
Auto Amazon Links: No products found. Blocked by captcha.