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Chancellor Rachel Reeves is considering a Income tax increase in next month’s budget This has been informed.
According to the Treasury, the Treasury is considering the possibility of raising rates by 2p, as well as cutting National Insurance by 2p. Wire.
comes after this Independent Ms Reeves is reported to be under pressure to break her manifesto pledge and change the top rate of income tax,
The Chancellor faces the prospect of rising taxes on November 26 as she seeks to balance the books, and maintain her golden rule of funding day-to-day spending with tax receipts.
On Wednesday, Sir Keir Starmer refused to stick to Labour’s manifesto pledge not to raise VAT, income tax or National Insurance in the Budget.
He has previously said that the commitment Labor has made to the electorate ahead of the 2024 general election is “permanent”, but failed to repeat that assurance in the Commons, and his press secretary also avoided using the phrase.
Asked about Conservative leader Kemi Badenoch’s promise, Sir Keir said no prime minister or chancellor would ever set out their plans in advance.
“The Budget is on 26 November and we will present our plans, but I can tell the House now that we will build a stronger economy, we will cut NHS waiting lists and deliver a better future for our country,” he said.
The Prime Minister’s Press Secretary similarly stated that “We are not going to pre-empt the budget” and that “the legacy we inherited from the previous government was worse than we all first thought.
“His disastrous austerity approach, his failed Brexit deal and Liz Truss’s borrowing spree caused serious damage to the economy, and the responsibility has fallen on this Government to clean up their mess.”
Ministry sources have already told Independent Changes to the top rate of income tax have been discussed in Whitehall as part of budget planning.
One source said: “The 45p rate is definitely in play. It would be a popular move within the party.”
The 45p rate is applied at 45 per cent on incomes above £125,140, and is expected to be paid by more than 1.2 million people by the end of the year.
Another source suggested it would be “understandable” if any breaches of manifesto promises were “targeted at the highest earners”.
The Institute for Fiscal Studies (IFS) warned earlier this month that Ms Reeves may need a £22 billion tax increase or spending cuts if she is to restore the £10 billion headroom she left against her debt target in the spring.
The gap is a result of higher borrowing costs, more persistent inflation and weaker growth, as well as a partial reversal of cuts in winter fuel payments and a weakening of welfare cut plans.
Ms Reeves hopes better-than-expected inflation data and a modest upgrade to some growth forecasts will help ease the pressure.
Tory leader Kemi Badenoch has said Ms Reeves should step down if she raises income taxes – but she will not commit to reversing any income tax rises if the Conservatives win the next election.
Speaking at a rally in central London on Thursday, she said: “Our message is simple. If she taxes, ax Reeves. That last budget was a disaster and after that she said she wasn’t coming back for more.
“And what are we hearing for the summer? Property tax increases, income tax increases, they want to tax our homes, they want to tax our pensioners, they want to tax our savings. Taxes, taxes, taxes, taxes, taxes. Enough. If she taxes, give Reeves the axe.”
but asked by Independent If While she would commit to reversing any income tax increases imposed by Labor in the Budget, Mrs Badenoch said she would have to “look at where we are in four years’ time”.
He added: “We talked about the things we were going to overturn, the family farm, the tax, the family business tax, the education tax.
“We want to end stamp duty. We want to end business rates for high streets.
“But we don’t know what kind of mess Labor is going to leave in four years’ time.
“We all know they’re going to leave a huge mess, and we have to clean it up, and we’ll do that by applying our Golden Economic Rule, making sure we’re paying down the deficit as well as investing.”