Overview
- The U-turn was communicated to the OBR on Wednesday, with officials briefed that the original income tax plan and first set of Budget measures had been effectively scrapped.
- Ministers are now considering a package of narrower tax changes, including caps on pension salary sacrifice, extended freezes or possible cuts to income tax thresholds, a gambling levy, higher property charges, and reduced ISA limits.
- The IFS estimates that extending the income tax threshold freeze to 2030 could raise about £8.3bn and push roughly 10 million taxpayers into higher-rate bands, a route seen as more likely than raising rates.
- Markets reacted to the reports: 10-year gilt yields rose about 0.11 percentage points to roughly 4.55% and sterling fell around 0.4% against the dollar to $1.31, with equities also weaker.
- Updated OBR assumptions have reportedly reduced the fiscal gap toward £20bn, yet business leaders say the shifting tax plan and delay to firm decisions are already weighing on confidence ahead of the Budget.