Overview
- After improved forecasts, the chancellor has ruled out a headline income tax rate increase and has shelved an exit tax and cuts to the pension tax‑free lump sum.
- The Treasury is exploring lowering income tax thresholds or extending the freeze, with reports pointing to a possible extension to 2030 as ministers seek to address an OBR‑flagged shortfall of about £20 billion.
- Illustrative modelling shows a cut in the personal allowance to £10,000 would add £514 to the tax bill of someone on £35,000, while the existing freeze has already raised an extra £89 billion this year versus 2021‑22, according to Hargreaves Lansdown.
- A £2,000 cap on salary sacrifice and removal of national insurance relief above that level are under consideration, which advisers say would lift marginal tax rates and could leave six‑figure earners with much smaller pension pots.
- Officials are also assessing a cap on high‑value bikes in the Cycle to Work scheme, and market reaction to the shifting plans has seen government borrowing costs rise, according to recent reports.