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”.
By contrast, if she ever actually cut tax, she’d shout it from the rooftops. “A working person is someone who goes out to work and who gets their income from work,” he told Sky News. The Prime Minister had suggested asset owners would not fall within his conception of what a working person is. Robert Salter of Blick Rothenberg told The i Paper earlier this year that this could generate up to £1.45bn per year – a significant sum for the Treasury. The bodies are also urging Ms Reeves “to ensure there will be no further widening of the tax differential between spirits and other alcohol categories”.
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Capital gains tax (CGT) is a charge on the increase in the value of an asset when you sell it. Bell left the think tank to become a Labour MP in 2024 and is reportedly playing a key role within the Treasury in the run-up to the Budget. By freezing tax bands while wages rise, millions are dragged into higher tax brackets without a single official “rise”.
Rachel Reeves told put 1p or 2p on income tax in ‘drastic move’ to save UK
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.
Budget 2024: Pensioners, wealthy, landlords and shareholders ‘face tax hit’ as Labour defines ‘working people’
- 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.
- “Policy U-turns, higher borrowing costs and lower productivity growth mean that the chancellor will need to act to avoid borrowing costs rising even further this autumn,” Mr Corlett said.
- 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.
- The tax plan keeps the Personal Allowance frozen, more pensioners are likely to be drawn into the tax system in the coming years, raising concerns about the financial strain on retirees with modest additional income.
- With growing public support for reform, the issue remains a point of debate.
- Alternatively, she could apply national insurance to dividend income and capital gains.
“Policy U-turns, higher borrowing costs and lower productivity growth mean that the chancellor will need to act to avoid borrowing costs rising even further this autumn,” Mr Corlett said. The government has yet to indicate any plans to raise the personal allowance. Tax owed on additional income is collected through PAYE for those with workplace pensions or employment, while others may receive a tax bill from HMRC each year. The petition follows recent calls from Liberal Democrat MP Ben Maguire, who urged the Chancellor to consider raising the tax allowance for those above State Pension age to £15,000. However, in a written response, Treasury Minister James Murray MP reaffirmed the Labour Government’s commitment to keeping taxes as low as possible for pensioners, while ensuring fiscal responsibility.
Freeze tax thresholds again
Here, The i Paper examines the most likely options currently under discussion – and who could be affected. The Bank of England left the interest rate unchanged last week amid fears that rising food prices were putting mounting pressure on headline inflation. The issue of tax is dominating the build up to the chancellor’s speech as she stares down a deepening black hole in the public finances. A report by the Organisation of Economic Co-operation and Development (OECD) has warned that higher taxes and spending cuts are set to weigh on UK output next year. Ms Reeves is expected to outline significant tax rises in the upcoming budget in November. This highlights the difficulty the government might face in trying to overhaul council taxes.
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.
Freezing the income tax thresholds has already become one of the most lucrative stealth taxes in recent political history. First announced by Rishi Sunak and extended by Jeremy Hunt, the measure has added nearly £40bn a year to Treasury coffers. Meanwhile, Ms Reeves has been urged to freeze alcohol duty in the upcoming budget and not increase the rate of excise tax on alcohol until the end of the current parliament. Another proposal by the think tank would see a gradual lowering of the threshold at which businesses pay VAT from £90,000 to £30,000, as this would help “promote fair competition” and raise £2bn by the end of the decade. And Matthew Pennycook insisted Labour will stick to its manifesto pledge to not increase income tax. With growing public support for reform, the issue remains a point of debate.
How the State Pension Rise Could Drag Millions Into Paying Income Tax by 2027
- Econostrum.info is your preferred source of economic information, focused on innovation, growth and sustainable development.
- The report said this tax would raise as much as stamp duty each year, but Savills’ head of residential research Lucian Cook said a gradual annual levy would not replace the lost revenue that stamp duty upfront payments provide immediately.
- Bell left the think tank to become a Labour MP in 2024 and is reportedly playing a key role within the Treasury in the run-up to the Budget.
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.
To fill the gap, reports have suggested the government is considering shaking up stamp duty and other property taxes – having repeatedly ruled out raising income tax, employee national insurance or VAT. Labour’s manifesto rules out an increase in the rate of VAT, National Insurance and income tax, and the Prime Minister and Chancellor have sought to caveat the pledge to applying to “working people”. Rachel Reeves has been urged by a think tank to cut national insurance and increase income tax to create a “level playing field” and protect workers’ pay.
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. emar coin While the Resolution Foundation estimated Ms Reeves would need to raise taxes by £20bn, others have suggested the figure could be as high as £51bn. But the chancellor will face a difficult balancing act when she delivers her Budget on 26 November in trying to meet that pledge while also sticking to the rules she has set herself on borrowing.