Thousands of UK workers could face an inevitable tax increase of at least £124 due to forthcoming changes proposed by HM Revenue & Customs (HMRC) under the current Labour government. Chancellor Rachel Reeves is being pressed to introduce income tax adjustments in the Autumn Budget scheduled for November 26.
The Confederation of British Industry (CBI) has called on the Treasury to prioritize creating fiscal space, even if it means overriding Labour’s manifesto promises. Rain Newton-Smith, the CBI’s chief executive, remarked, “The Labour Party’s manifesto commitments are no longer economically viable.”
Tax specialist Shaun Moore of Quilter highlighted that the Chancellor must weigh how much political capital she is prepared to expend to restore public finances.
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To put the figures into perspective:
- At an income of £25,000, a 1p rise in income tax would cost £124 annually, or £249 for a 2p increase. A National Insurance rise could add up to £746.
- For someone earning £50,000, a 1p tax hike would mean £374 more per year, with a 2p increase costing £749. Potential National Insurance contributions could rise by £2,246.
- At £75,000 earnings, a 1p rise equates to a £624 expense, while 2p adds £1,249; National Insurance increases could total £2,757.
- For £100,000 earners, the costs are £824 and £1,749 for 1p and 2p rises respectively, with a possible £3,257 National Insurance charge.
- Those earning £125,000 may see increases between £1,249 (1p) and £2,499 (2p), while £150,000 earners could face £1,500 to £3,000 hikes.
The CBI emphasizes that although tax rises and spending cuts are unpopular, Chancellor Rachel Reeves has limited alternatives to improve the UK’s fiscal health.