It’s less than 48 hours until Labour unveils its latest round of tax rises, money changes and financial plans for the next year – and financial experts have pointed to the three taxes they think should increase this Wednesday.
Chancellor Rachel Reeves is being tipped to raise taxes again in her Autumn Budget on November 26, and financial think tank the Institute for Government has previously given its verdict on which taxes it thinks the government should target for increases as it looks to balance the nation’s books.
The Institute says it is ‘almost certain’ that taxes will rise this autumn thanks to ‘high level of government debt’ and a volatile market and that the best way to tackle it is by breaking a manifesto pledge.
It has pointed to three key taxes paid by the largest number of people that it says are the best candidates for increases, even though it would break a key Labour promise.
It says, in its 2025 budget speculation insight paper published in September: “It appears almost certain that Reeves will raise taxes this autumn after promising that her 2024 budget rises were a one-off. That is dictated not just by her fiscal rules but also by the already high level of government debt and debt issuance and volatile market sentiment, which reduce her leeway.
“The Treasury does seem to be engaging in some fairly extensive kite flying, for example around property tax reform, and think tanks are piling in with their own proposals. This may be a sign that Reeves is steeling herself to be a tax reforming as well as a tax raising chancellor. But this sort of unofficial kite flying (which happened in the run-up to the 2024 budget and the 2025 spring statement as well, with rumours about pensions tax reform and changes to ISAs) is no substitute for official, open work preparing the ground for serious reform.
“Reeves has left things too late to do that this autumn. As such, her options for tax rises in the next Budget are likely limited to well-understood and easy to implement changes.”
The Institute points to VAT, Income Tax and National Insurance as the best options for tax rises.
It continues: “Raising substantial revenue will likely require broad-based tax rises that are paid by a large population. The best candidates would be increases to the main rates of VAT, Income Tax and National Insurance – even if that has to come at the political price of undoing one of Labour’s (rash) manifesto commitments.
“Announcing a further freeze to income tax and NICs thresholds in 2029 would not be as transparent as an increase in rates but would still be paid by a broad group of people (and would not breach the manifesto commitments), so would be a better option in the short-term than other more distortive changes.”
In September another think tank, The Resolution Foundation, put forward a suggestion for raising Income Tax while cutting National Insurance.
It said that National Insurance should be cut by two percentage points, and Income Tax raised by two percentage points, called a ‘two up, two down tax’.
This would balance out for working people, who would end up paying the same tax, but it would lead to an increase in taxes for pensioners, landlords and the self-employed, who don’t pay National Insurance on their earnings.
According to the latest speculation, Ms Reeves is thought to have abandoned plans to raise Income Tax directly, instead looking at measures such as extending the freeze on tax bands.
After scrapping plans to raise Income Tax, she is expected to look to a “smorgasbord” of smaller measures to bring in cash.
She is thought to be considering bringing in a pay-per-mile tax for electric vehicle drivers and limiting how much workers can stash in their pensions under salary sacrifice schemes before paying National Insurance.
And she is set reaffirm the Government’s commitment to the triple lock on state pensions, and confirm that 13 million pensioners are set to benefit from an above inflation rise next April.
An extension of the freeze on Income Tax thresholds is also among rumoured measures and would see more people dragged into paying tax for the first time or shifted into a higher rate as their wages go up, which is known as fiscal drag.
