{"id":285830,"date":"2025-11-16T01:43:14","date_gmt":"2025-11-16T01:43:14","guid":{"rendered":"https:\/\/www.newsbeep.com\/ca\/285830\/"},"modified":"2025-11-16T01:43:14","modified_gmt":"2025-11-16T01:43:14","slug":"rachel-reeves-set-to-hit-one-in-five-with-stealth-tax-in-plan-to-extend-income-tax-threshold-freeze","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ca\/285830\/","title":{"rendered":"Rachel Reeves set to hit one in five with stealth tax in plan to extend income tax threshold freeze"},"content":{"rendered":"

Chancellor Rachel Reeves is set to announce an extension to the freeze on income tax thresholds in a move that will pull more workers into higher tax bands through fiscal drag.<\/p>\n

The measure, which has been reported to extend the freeze until 2030, is forecast to raise around \u00a38billion a year for the Treasury and will affect approximately 10 million people – equivalent to almost one in five adults.<\/p>\n

The decision follows updated projections from the Office for Budget Responsibility (OBR) which have given the Chancellor more fiscal room than previously expected.<\/p>\n

It also comes after weeks of preparation for possible tax rises, with Ms Reeves warning on September 1 that avoiding such measures would require “deep cuts” to public investment.<\/p>\n

The extended freeze would mark a shift in approach by allowing the Government to raise revenue without changing income tax rates themselves.<\/p>\n

It would also preserve Labour’s manifesto pledge not to increase income tax rates while the Treasury evaluates alternative sources of income.<\/p>\n

These include potential limits on salary sacrifice arrangements and new charges linked to electric vehicles.<\/p>\n

Officials are understood to be examining what has been described as a “smorgasbord” of smaller tax measures rather than introducing a single major rise.<\/p>\n

\"Rachel<\/p>\n

Rachel Reeves has vowed to be on the side of working people<\/p>\n

| <\/p>\n

GETTY<\/p>\n

Among the options is a new levy on high-value properties<\/a> which would mainly affect homes in London and the South East.<\/p>\n

The threshold freeze is expected to hit middle earners hardest as rising wages driven by inflation push salaries into higher tax brackets, even though tax rates remain unchanged.<\/p>\n

Shaun Moore, tax and financial planning expert at Quilter, calculates an employee earning \u00a344,000 will pay an additional \u00a32,978 in tax over four years if the thresholds stay frozen.<\/p>\n

For someone earning \u00a340,000, the freeze increases their bill by \u00a3321 during the same period.<\/p>\n

Mr Moore said: “People have already been dragged into higher tax brackets simply because their wages have risen only to stand still in real terms.”<\/p>\n

\"TaxUK tax burden as a percentage of GDP | GB News<\/p>\n

He added the mechanism results in automatic annual tax increases without the need for parliamentary approval as long as thresholds remain static.<\/p>\n

Economists and financial analysts have raised concerns about the wider consequences of the Chancellor’s decision.<\/p>\n

Helen Miller, director of the Institute for Fiscal Studies (IFS), said that “the news that Rachel Reeves has backed away from a plan to increase the rates of income tax will lead investors to worry that the Chancellor will instead increase a range of smaller taxes that can be more damaging to economic growth”.<\/p>\n

Market reaction appeared swift, with Government borrowing costs rising on Friday as gilt investors absorbed the implications of the shift.<\/a><\/p>\n

Ms Miller said that markets may see the reversal as evidence “that this Government are reluctant to do politically difficult things”.<\/p>\n

She cautioned that such perceptions could lead investors to “demand higher returns when lending to the Government”.<\/p>\n

John Clamp said that frozen thresholds result in “annual tax rises without many taxpayers even realising,” which he argued risks eroding trust in the tax system.<\/p>\n

The Prime Minister’s official spokesman said on Friday that despite the decision to maintain the threshold freeze, Ms Reeves’s November 4 speech on fiscal pressures “still stands”.<\/p>\n

\"Tax<\/p>\n

As inflation increases wages, frozen tax bands mean people end up paying higher tax without pay increases in real-terms<\/p>\n

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GOV.UK<\/p>\n

“She was very clear about the challenges the country faces and her priorities in addressing those challenges.”<\/p>\n

The Chancellor is continuing to seek additional fiscal headroom to protect Government spending plans against potential economic uncertainty.<\/p>\n

Ms Miller noted while adjustments ahead of fiscal events are not uncommon, reversals of this scale could intensify scrutiny from financial markets.<\/p>\n

She said any smaller tax measures introduced alongside the threshold freeze should be designed to limit their impact on economic growth.<\/p>\n

The Treasury declined to comment.<\/p>\n","protected":false},"excerpt":{"rendered":"Chancellor Rachel Reeves is set to announce an extension to the freeze on income tax thresholds in a…\n","protected":false},"author":2,"featured_media":285831,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[45,49,48,46,134,714,6108,3322,18461],"class_list":{"0":"post-285830","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-business","9":"tag-ca","10":"tag-canada","11":"tag-economy","12":"tag-money","13":"tag-politics","14":"tag-rachel-reeves","15":"tag-tax","16":"tag-uk-politics"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/285830","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=285830"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/285830\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/285831"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=285830"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=285830"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=285830"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}