Chancellor Rachel Reeves 'considering income tax threshold squeeze' in Budget

In the United Kingdom, Chancellor Rachel Reeves is contemplating extending a freeze on income tax thresholds that was originally implemented by former Chancellor Rishi Sunak in 2021. This move aims to address a £22 billion shortfall in public finances triggered by the preceding government's policies. The initial freeze prevented income tax thresholds from rising with inflation, effectively increasing the tax burden on many workers and potentially shifting them into higher tax bands. As Reeves prepares for another Budget on October 30, 2024, it is reported that this measure could be prolonged beyond its intended expiration in 2028. Additionally, the Chancellor is rumored to be considering various tax hikes and spending cuts to mitigate financial challenges, including an increase in inheritance tax for wealthy individuals and adjustments to stamp duty. These proposals come amid assurances from Labour leadership that taxes for working people would not be raised. Keir Starmer, Labour leader, reinforced the commitment to maintain manifesto promises while indicating the necessity to rebuild the country’s economic foundation. The freeze could disproportionately affect lower to middle-income households and challenge Labour's pledge of not raising taxes for this demographic. Furthermore, potential measures might include raising levies on vapes and increasing fuel duty. These strategies underline the pressing need for the government to restore fiscal stability while navigating public sentiment regarding taxation and spending. Thus, upcoming fiscal policies will be closely scrutinized to assess their implications for citizen welfare and economic recovery.