British Finance Minister Rachel Reeves is expected to unveil a series of tax increases in her upcoming budget to meet self-imposed fiscal rules and fund anticipated increases in welfare spending. These measures are crucial for maintaining the confidence of bond investors amid a challenging economic landscape. Reeves aims to strike a balance between fiscal responsibility and avoiding tax increases for “working people,” a promise made last year.
Several potential tax adjustments are under consideration. These include extending a freeze on income tax thresholds until 2030, which could raise approximately £8 billion annually. Adjustments to pension contribution rules and a surcharge on higher-value properties are also being evaluated. Legal & General CEO Antonio Simoes has cautioned against measures that might discourage pension savings, as concerns about potential tax increases have already led to increased pension withdrawals.
Other options being explored include streamlining value-added tax by eliminating reduced rates on certain goods. Additionally, ending the freeze on fuel duty, in place since 2011, could significantly boost revenue. While higher taxes on banks have been suggested by think tanks, Reeves has expressed a desire to maintain a competitive environment for financial services. A new per-mile tax on electric vehicles is slated for 2028, and increases in taxes on alcohol, tobacco, gambling, and vaping are also possible.
Reeves has ruled out a wealth tax but has indicated that higher taxes on the wealthy will be part of the broader fiscal strategy. This has led to speculation about potential increases in taxes on capital gains and other income sources. Plans to tax individuals leaving the country and cuts to tax-free cash Individual Savings Accounts have also been discussed, though some proposals have reportedly been deemed unworkable and dropped.
