He froze income tax and National Insurance thresholds until 2028, a move that will cost taxpayers tens of billions. This isn’t just another left-leaning economist calling for a tax raid on the wealthy. Johnson is a serious, independent voice – and he reckons Reeves has to raise income tax in October. Reeves could introduce national insurance contributions on rental income, or explore other changes such as creating a separate tax band for property earnings or applying VAT to residential lettings. One option would remove both forms of relief, costing a typical worker on £35,000 about £560 annually.
Tax on wealth, not wages
Ahead of last year’s election, Labour ruled out imposing capital gains taxes on primary home sales, with Sir Keir Starmer saying he “absolutely” guaranteed it wouldn’t happen over Labour’s first parliament. Such changes would require extensive consultation and coordination with local authorities. And a Government source has told The i Paper that ministers were not considering such a move.
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Despite widespread opposition to the current council tax system, government proposals for changes to the system have also come under scrutiny for taking money away from some areas to increase funding in others. As such, reports suggest any abolition of stamp duty would come alongside other property tax changes. The government is considering removing this relief for pricier homes, according to the Times, which would mean those sales would be subject to CGT, the current rates being 24% for higher-rate taxpayers and 18% for lower-rate taxpayers. Since Healey’s hike, politicians have treated income tax rises as political suicide.
However, additional income from employment, private pensions, or workplace pensions may push many pensioners above the personal allowance threshold, requiring them to pay income tax. The government has repeatedly insisted it will keep its manifesto promise not to raise income tax, national insurance emar coin or VAT. The government has repeatedly insisted that it will keep its manifesto promise not to raise income tax, national insurance or VAT.
- These factors highlight the growing concerns surrounding Rachel Reeves’ tax plan, as pensioners and policymakers debate whether the current system fairly balances government revenues with the financial security of retirees.
- The annual rate would be set by the government, but the report suggests it should be a 0.54% tax levied on home value between £500,000 and £1m when bought, and a higher rate for any home value beyond £1m.
- Ms Reeves has also loosened her debt fiscal rule to borrow tens of billions more for transport and other infrastructure projects but this has sparked warnings that the move could put upward pressure on interest rates and mortgage bills.
- It released its report as a closely-watched survey of business activity suggested a loss of momentum and confidence ahead of possible new tax increases in the budget.
Econostrum.info is your preferred source of economic information, focused on innovation, growth and sustainable development. Since its launch, the petition has gathered 12,000 signatures, prompting a mandatory government response. If it reaches 100,000 signatures, it could be considered for debate in Parliament. “We are committed to keeping taxes for working people as low as possible,” a spokesperson said. Critics say this way of valuing properties is complicated and also argue that there are unfair disparities because it is calculated at a council level.
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Colleen Babcock, Rightmove’s property expert, says the tax is “a huge barrier to movement, from first-time buyers to downsizers”. Unlike CGT, this tax does not apply to the change in value of the property but to the value of the property when bought. Simon French, chief economist at Panmure Liberium, told the BBC that axing the relief “would be potentially incredibly lucrative but also incredibly controversial”. Critics argue that removing CGT relief for higher value home sales would slow down those transactions, meaning it might not raise as much as the government would like.
- The Resolution Foundation says the chancellor could raise £6bn with a 2p cut in national insurance, matched by a 2p rise in income tax, which would create a “level playing field” and protect workers’ pay.
- “We are committed to keeping taxes for working people as low as possible,” a spokesperson said.
- Pension contributions currently benefit from both income tax and national insurance relief – a longstanding incentive to save for retirement.
Petition Calls for a Higher Personal Allowance
This approach is backed by some economists, as well as many Labour MPs, who argue that taxing income from wealth more fairly could help boost growth. Other possibilities include capping the 25 per cent tax-free lump sum available at retirement, or offering tax relief at a flat rate instead of a person’s marginal rate. A Treasury spokesperson said there will be no export duty, lower licensing fees, reduced tariffs, and a cap on corporation tax to make it easier for British distilleries to thrive. A Treasury spokesperson said in response to the think tank report it does “not comment on speculation around future changes to tax policy”. The think tank, which used to be headed by Torsten Bell, a Labour MP who is now a key aide to Ms Reeves and a pensions minister, said the move would help to address “unfairness” in the tax system. He said “the principles that will underpin this Budget are that we’re going to build an economy that works for all working people, we’re going to stick to those non-negotiable fiscal rules that have provided us the foundation for economic stability”.
Increasing them by a further 3 per cent above inflation could raise £315m, according to some estimates. The £325,000 threshold for tax-free transfers has remained unchanged since 2009, and unused pension pots were brought into the tax last year. A one percentage point rise in employee and employer contributions would raise billions. Lowering the national insurance threshold, currently £1,048 per month, is another potential lever. To stay within the rules, NIESR stated that the Chancellor must raise taxes moderately but persistently.
The Resolution Foundation says the chancellor could raise £6bn with a 2p cut in national insurance, matched by a 2p rise in income tax, which would create a “level playing field” and protect workers’ pay. The chancellor is expected to outline significant tax rises in the upcoming budget in November, as borrowing costs soar. Months of speculation has included talk of a potential wealth tax, changes to council tax, and more. Adam Corlett, principal economist at the Resolution Foundation, said cutting national insurance and increasing income tax “should form part of wider efforts to level the playing field on tax”. Rachel Reeves has been urged by a leading think tank to raise income tax while cutting national insurance in November’s Budget, a move that would hit landlords and pensioners hardest.
Pension contributions currently benefit from both income tax and national insurance relief – a longstanding incentive to save for retirement. But with tax receipts under pressure, Reeves could consider scaling this back. Extending the freeze until 2030 would mean most pay rises over the next few years push workers into higher bands – a process known as fiscal drag. Analysis suggests that a typical worker could pay £324 more in income tax per year by the end of the decade. He added that while any tax rises are “likely to be painful”, Ms Reeves should do “all she can to avoid loading further pain onto workers’ pay packets”. The call comes days after experts warned tax rises were “inevitable” in the wake of new figures which showed government borrowing had soared, the latest in a long list of blows for the chancellor.
For example, if someone bought a property for £600,000, they would only pay the 0.54% rate on £100,000. Meanwhile, people purchasing homes valued under £500,000 would not pay anything. The annual rate would be set by the government, but the report suggests it should be a 0.54% tax levied on home value between £500,000 and £1m when bought, and a higher rate for any home value beyond £1m.
“Any tax rises are likely to be painful but given the fallout from the recent employer national insurance rise, the chancellor should do all she can to avoid loading further pain onto workers’ pay packets. The UK Government is facing growing pressure to increase the personal tax allowance under Rachel Reeves’ tax plan, as a new petition calls for a rise from £12,570 to £20,000. The proposal aims to help low-income individuals and pensioners retain more of their income, amid concerns that many retirees will be pushed into paying tax under Rachel Reeves’ fiscal policies. The statements by the PM, Chancellor and ministers about the definition of “working people” has left the door wide open to pensioners, the wealthy, landlords and people with significant shareholdings facing a tax blow in the Budget. Labour’s manifesto pledged not to raise national insurance – alongside income tax, VAT, and corporation tax – but Reeves could argue that the scale of the fiscal challenge leaves no alternative. Ms Reeves is facing increasing pressure to rescue the UK’s troubled finances in the Budget, amid warnings she must cut public spending or raise levies to plug an economic black hole left by Labour U-turns, higher borrowing and sluggish economic growth.
Some of Reeves’s options involve keeping to the letter of the manifesto while expanding the reach of existing taxes. The National Institute of Economic and Social Research (NIESR) has warned that without action, the Government will miss its key fiscal rule, which requires day-to-day spending to be funded by tax receipts, by £41.2bn by 2029–30. And, amid rising expectations major tax hikes are on the way, Treasury chief secretary James Murray refused on Monday to rule out increases. Speaking to ITV’s Peston, Mr Murray said he would not “write a Budget here”, pointing to the November 26 event instead. For individuals seeking clarity on their future State Pension payments, the government offers an online forecasting tool on GOV.UK. The policy has a cheerleader in Torsten Bell, who was chief executive of the Resolution Foundation when it was initially floated as an idea.
The Department for Work and Pensions (DWP) is set to publish an updated list of State Pension and benefit payments, with adjustments expected across various pension elements. This means two people both living in homes with the exact same value would not pay the same council tax if they lived in two different council areas. One such replacement for stamp duty could be a national proportional property tax on homes worth over £500,000. However, getting rid of stamp duty would also mean lost revenue, with £11.6bn raised from the tax in the last financial year.