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\t\tRachel Reeves is launching a \u00a326bn tax raid at the Budget. James Manning\/PA Wire\t<\/p>\n\t\t\tWednesday 26 November 2025 6:03 pm\n\t\t\t<\/p>\n
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\t\tRachel Reeves is launching a \u00a326bn tax raid at the Budget. James Manning\/PA Wire\t<\/p>\n
Chancellor Rachel Reeves has announced an avalanche of tax rises on the wealthy and on working people, adding up to \u00a326bn to fund extra spending over the next five years, as she vowed to make the country more \u201csecure\u201d. <\/p>\n
Her biggest announcement included freezing income tax and national insurance thresholds until 2031 to raise \u00a311bn by the end of parliament. <\/p>\n
It represents another government U-turn after Reeves said last year she would unfreeze tax bands from 2028 in order to keep to \u201cevery single promise\u201d she made in the Labour manifesto.<\/p>\n
The measure is widely referred to as a \u201cstealth tax<\/a>\u201d as earnings are taxed more in real terms due to the rise in inflation, with people on the state pension set to be dragged into bands for the first time next year.\u00a0<\/p>\n The Office for Budget Responsibility (OBR) said the freeze on income tax thresholds<\/a> would lead to 920,000 more people paying the higher 40 per cent income tax rate and 780,000 more people paying into government coffers at the basic rate by 2030. <\/p>\n The Chancellor also targeted the wealthy by introducing new taxes on motorists<\/a>, wealthy home owners<\/a> and savers<\/a> to fund up to \u00a370bn more welfare spending by the end of parliament, which was larger than a previous projection due to abandoned welfare savings and the lifting of the two-child benefit cap at a cost of \u00a33bn. <\/p>\n The brutal fiscal measures came as the OBR took a critical view of Labour\u2019s growth mission.\u00a0<\/p>\n Her previous \u00a39.9bn headroom left at the Spring Statement was wiped out by the OBR\u2019s 0.3 percentage point downgrade to productivity forecasts, leaving growth weaker in every year of the OBR\u2019s forecast period other than 2025.<\/p>\n Reeves said: \u201cThese forecasts are the Tories\u2019 legacy, not Britain\u2019s destiny. We beat the forecasts this year and we will beat them again.\u201d<\/p>\n Speaking to journalists after the Budget, Reeves told journalists that her measures were \u201chighly progressive\u201d as she refused to rule out hiking taxes at future fiscal statements.<\/p>\n \u201cShe said: \u201cI can\u2019t write future Budgets, but if you are asking, \u2018is this a Budget I wanted to deliver today?\u2019 I would have rather the circumstances were different.\u201d<\/p>\n<\/p>\n Reeves boosts headroom to \u00a322bn<\/p>\n Reeves\u2019 fiscal tightening led to her headroom being doubled to \u00a322bn, representing her commitment to \u201ciron-clad\u201d fiscal rules stating day-to-day spending should match tax intake in the last year of the forecast period.\u00a0<\/p>\n \t\t\t\t\tRead more<\/p>\n \t\t\tOBR accidentally publishes full Budget before Reeves speech<\/a><\/p>\n But the OBR<\/a> suggested there was just a 59 per cent chance of Reeves meeting her fiscal rules, a marginal five percentage point increase on the probability figure published at the Spring Statement.<\/p>\n City analysts and think tanks suggested that back-loaded tax hikes around the time of the next General Election may not stick, with top firms warning that further tax hikes or spending cuts were to be expected.<\/p>\n<\/p>\n Helen Miller, the boss of the Institute for Fiscal Studies, called out the \u201cspend now, pay later\u201d Budget measures that showed \u201cno real appetite for using tax reform to boost growth\u201d.<\/p>\n David Rees, head of global economics at Schroders, one of the biggest holders of government bonds, said: \u201cWe suspect it will not be long before the government is forced to come back with more fiscal consolidation.<\/p>\n \u201cThe government\u2019s poll ratings meant the Chancellor backed away from plans to raise income tax, instead opting for a range of smaller, back-loaded measures to raise revenues.<\/p>\n Firing back at Reeves\u2019 measures, Tory leader Kemi Badenoch hit out at Reeves\u2019 \u201claundry of excuses\u201d, calling for her resignation for \u201cbreaking her promises\u201d. Reform UK\u2019s Nigel Farage said the Budget was an \u201cassault on aspiration\u201d.\u00a0<\/p>\n Frenzied lead-up to the Budget<\/p>\n The Budget speech was undermined by an OBR error<\/a> in publishing the fiscal forecast and all the measures around 30 minutes before Reeves stood up in the House of Commons.<\/p>\n Richard Hughes, the chair of the OBR, was forced to apologise for the early release during a press conference in the afternoon while a spokesman for Reeves said she still had confidence in the watchdog chief. <\/p>\n The run-up to the Budget featured frenzied briefings on tax hikes and other Budget policies, with Reeves holding a \u201cscene setter\u201d press conference in early November hinting at a rise in income tax rates.\u00a0<\/p>\n Fresh plans to ditch the tax, which were reported in the Financial Times, led to City traders selling bonds and borrowing costs rising for the government.\u00a0<\/p>\n Bank of England Governor Andrew Bailey criticised Budget leaks as he said speculation had dampened growth.\u00a0<\/p>\n Former OBR chiefs also told City AM that the Chancellor could not claim to be surprised by the OBR\u2019s decision to launch a review of its productivity forecasts<\/a>.<\/p>\n \t\t\t\t\tRead more<\/p>\n