Rachel Reeves was last night accused of breaking her promises to the British people as she is expected to extend a freeze on income tax thresholds in the Budget.
Despite Labour pledges not to increase the tax burden on working people, the Chancellor is said to be prolonging the ‘stealth tax’ raid beyond 2028 – the end point given by Rishi Sunak when he announced the freeze in 2021.
The move, expected to raise £7billion a year, will drag hundreds of thousands more people into the top income tax brackets as their salaries rise in line with inflation.
It comes as Ms Reeves also plots a raid on grieving families, setting her sights on inheritance tax. Labelled Britain’s ‘most hated tax’, it is set for sweeping changes on October 30, as the Chancellor aims to raise £40billion to avoid real-term departmental cuts.
Labour ruled out increases to taxes for ‘working people’ such as VAT, income tax and National Insurance as part of its election manifesto, so it has been targeting funds from historically smaller tax pots.
Chancellor Rachel Reeves is expected to announce an extension to the freeze on income tax thresholds in her Budget
Sir Keir Starmer insisted at a press conference in Berlin yesterday that the party would keep its manifesto pledges
But party sources said freezing thresholds would not count as a tax rise, telling the Financial Times: ‘We said we would protect working people and not increase rates of income tax, National Insurance or VAT.’
And at a press conference in Berlin yesterday, Sir Keir Starmer insisted: ‘We are going to keep our manifesto pledges.’
But the Tories accused the Government of breaking promises.
Gareth Davies, a shadow Treasury minister, said: ‘With less than two weeks to the Budget, it has become clear this Government is planning to break promises they made to the British people. Now we have learnt every one of those hollow pledges could be on their political chopping block.’
Meanwhile, Stuart Adam, of the Institute for Fiscal Studies (IFS), told The Times: ‘The promise not to increase the basic, higher and additional rates of income tax was carefully worded and deliberately leaves the door open to other changes to income tax that could raise money.’
Inheritance tax receipts rose by £300million from April to August compared to the same period last year (file photo)
The Treasury declined to comment on ‘speculation’ on either income or inheritance tax.
Inheritance tax receipts are already up on last year. From April to August they rose by £300million compared to the same period last year, according to the latest official figures.
The tax is paid at a rate of 40 per cent on an estate over the £325,000 threshold, which is the nil-rate band.
Experts believe the 40 per cent charge is unlikely to be increased, but the nil-rate band could be slashed to catch more people in the death tax net.
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