2025 Budget: Rachel Reeves hints at UK tax increases despite election promise - what it means for your money
Millions of UK workers could see more of their wages taxed 💷
- Chancellor Rachel Reeves has hinted that Labour may break its pledge not to raise taxes at this month’s Budget
- Reeves could freeze income tax thresholds, meaning more of your pay is taxed
- While rumoured Employer National Insurance rises would affect business, they could indirectly affect wages or prices.
- But the child benefit cap may be removed, giving larger families extra support
- Reeves’ said her changes would aim to protect public investment and long-term economic growth
Chancellor Rachel Reeves has strongly hinted that Labour’s election pledge not to raise income tax, National Insurance or VAT could soon be broken, setting the stage for one of the most consequential Budgets in recent years.
Speaking to BBC Radio 5 Live this week (November 10) ahead of her November 26 Budget, Reeves said the Government faced a stark choice: stick to tax promises made during the election campaign, or risk “deep cuts” to investment in key national projects.
The Chancellor made clear she believes the latter would harm the UK’s long-term growth, a sign she’s preparing voters for some difficult decisions.
“It would, of course be possible to stick with the manifesto commitments,,” she said, “but that would require things like deep cuts in capital spending and the reason why our productivity and our growth has been so poor these last few years is because governments have always taken the easy option to cut investment – in rail and road projects, in energy projects, in digital infrastructure.”
Sir Keir Starmer’s landslide election win was built on a promise not to increase income tax, employees’ national insurance or VAT, but Reeves’ comments mark the clearest indication yet that Labour’s tax lock is no longer sustainable.
The Chancellor said she would be forced to take difficult decisions in the Budget by a perfect storm of economic pressures, including ongoing wars in Ukraine and the Middle East, and global trade tensions worsened by Donald Trump’s tariffs in the US.
But for millions of working people, the question now is simple: “will I end up paying more?”
What might change – and what it means for you
The Treasury has been “looking at both taxes and spending,” Reeves confirmed, suggesting a broad rethink rather than one-off adjustments. Here’s what could be on the table:
Income tax thresholds
The most politically risky move would be to raise income tax rates directly. But Reeves could instead freeze thresholds again, dragging more people into higher tax bands as wages rise.
If that happens, it means the points at which you start paying higher rates of income tax won’t rise with wages or inflation.
So even if your pay goes up slightly, you could end up moving into a higher tax band, paying a bigger share of your income in tax, even though your real spending power hasn’t increased.
You wouldn’t see a new tax rate, but more of your pay would be taxed, so you’d take home less money despite earning more.
National Insurance
Though Labour vowed not to hike NI for employees, an increase for employers, similar to one Reeves introduced last year, could be extended.
The move would target business, but though workers won’t pay, companies might respond by slowing pay rises, cutting bonuses, reducing staff, or raising prices for goods and services.
Wealth and property taxes
Reports suggest the Chancellor could consider changes to capital gains or inheritance tax, potentially focusing on wealthier households to avoid hitting middle earners too hard.
Any such move would mainly affect people with investments, property, or large estates rather than regular wages, though it could influence things like property prices or investment returns if the wealthy adjust their finances.
Child benefit cap
Reeves also hinted the Government will scrap the two-child benefit limit, calling child poverty “a cost to our economy”.
If the limit is removed, families with more than two children would get extra child benefit payments, giving them more money to help with everyday costs
Removing the cap would mark a major shift in welfare policy, but since the Government would need to pay for it, it could be funded by tax increases elsewhere
Will these changes actually happen?
Reeves insists any changes will be made “in the national interest,” arguing that doing nothing would jeopardise Britain’s recovery and stall investment in essential infrastructure.
She also pointed to early signs of success from her first Budget, saying higher taxes on businesses and the wealthy have helped stabilise public finances, cut NHS waiting lists and paved the way for lower interest rates. But not everyone is convinced.
Labour deputy leader Lucy Powell warned that breaking the tax pledge could damage public trust, while Conservative shadow chancellor Sir Mel Stride accused Reeves of “pulling the wool over voters’ eyes,” claiming she’s already raised taxes by £40 billion and is preparing to do so again.
For now, the Chancellor is keeping her cards close to her chest, but with global instability squeezing the Treasury, Reeves’s “difficult decisions” could soon land on payslips.