HM Revenue and Customs (HMRC) is set to bill every taxpayer an average of £377 more each year following proposed changes under a Labour government, experts warn. This announcement precedes Chancellor Rachel Reeves’ Autumn Budget, scheduled for November 26, 2025.
Financial analysts at AJ Bell suggest the simplest approach would be to increase the basic income tax rate by one percentage point, from 20% to 21%. This adjustment would affect anyone earning above the Personal Allowance threshold of £12,570, with higher earners bearing the brunt of the increase.
For individuals earning £50,270 or more, this change could mean an additional £377 annually. Those earning £35,000 would see a rise of £224, while taxpayers on £15,000 would face a smaller increase of around £24. Notably, this tax hike would apply not only to earned income but also to pension income, rental income, and interest from savings.
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A more extensive option involves increasing all income tax bands by one percentage point, raising the higher rate to 41% and the additional rate to 46%. However, this incremental hike generates comparatively marginal additional revenue for the government.
According to HMRC data, raising the basic rate to 21% would bring in an estimated £6.9 billion in the next fiscal year and £23.4 billion over three years. In contrast, increasing the higher rate to 41% would yield only £1.6 billion, with the additional rate uplift generating a mere £145 million.
Laura Suter, AJ Bell’s Director of Personal Finance, commented on the forthcoming budget: “The recent speech by Chancellor Reeves, just 20 days before the Budget, signals clear intentions to raise taxes. The context she provided confirms that tax hikes are on the horizon when she delivers her statement on November 26th.”
As the date approaches, taxpayers should prepare for changes that may impact their finances significantly.