Rachel Reeves abandons income tax rise as backlash forces major budget rethink

"Chancellor Rachel Reeves has abandoned plans to raise income tax in this month's Budget, backing away from what would have been a dramatic break with Labour's manifesto pledge after warnings it risked sparking a backlash among MPs and voters. According to officials briefed on the decision, Reeves and Prime Minister Sir Keir Starmer have "ripped up" the proposal, which had been included in the Chancellor's initial submission of "major measures" to the Office for Budget Responsibility earlier this month."

"Instead of a single high-profile tax rise, Reeves is now expected to pursue what Treasury insiders describe as a "smorgasbord" approach: a series of narrowly targeted tax measures designed to raise the £30 billion needed to fill the gap in the public finances. Options likely to feature include a new gambling levy and increased taxes on high-value properties. The Chancellor is also under pressure after ditching a separate multibillion-pound plan to impose a charge on professionals who use limited liability partnerships."

"Reeves had hoped a new levy would raise around £2 billion a year, but Treasury modelling suggested it could ultimately cost the government money, as firms would accelerate profit declarations to avoid the new charge. "Rachel decided it just isn't worth it," one official said. There is further uncertainty around proposals for a new "settling-up charge" - an exit tax of up to 20 per cent on assets left in the UK by wealthy individuals who relocate to"

Chancellor Rachel Reeves abandoned planned income tax increases for this month's Budget after concerns about backlash from MPs and voters. Reeves and Prime Minister Sir Keir Starmer ripped up the proposal that had been included in the Chancellor's initial submission of "major measures" to the Office for Budget Responsibility and communicated the U-turn to the OBR. Reeves had signalled a possible rise but shifted course amid worries about alienating backbenchers and households facing rising living costs. The Treasury now plans a smorgasbord of targeted measures, including a gambling levy and higher taxes on high-value properties, to raise about £30 billion. A proposed levy on professionals using limited liability partnerships was dropped after modelling suggested it could reduce revenues.

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