Labour Party Chancellor Rachel Reeves is considering a rise in income tax in the forthcoming Autumn Budget, a move that could see many workers facing increased tax bills of several hundred pounds. Despite assurances to support working people by keeping their taxes low, Ms Reeves is reportedly reviewing options that may include increasing the basic income tax rate by 1p, potentially generating around £8 billion in additional revenue.
For those earning around the average UK salary of £35,000, this 1p increase could raise their annual tax bill from approximately £4,486 to £4,710—a jump of about £224. Workers earning £37,439 could see their tax burden rise by roughly £250, adding just over £20 per month to their costs. Even lower-income earners making £20,000 would notice an increase, with their annual tax payments climbing by about £74.30 to reach £1,560.30.
Personal finance analyst Alice Haines from Bestinvest highlighted that salary sacrifice schemes could help employees near the higher tax threshold reduce their taxable income, consequently lowering both income tax and National Insurance Contributions. She emphasized the dual benefits of pension contributions, which not only enhance retirement savings but also provide immediate tax relief at the individual’s marginal rate.
As the Chancellor finalizes the Budget, workers across the UK should prepare for the possibility of higher income tax rates, weighing strategies to mitigate the financial impact.