Overview
- The Chancellor has notified the Office for Budget Responsibility that an income tax increase is among the major measures under preparation, with OBR forecasts due on November 21 ahead of the November 26 Budget.
- A widely discussed option would pair a 2p rise in income tax with a 2p cut to employee National Insurance for earners below about £50,000, which analysts say could raise more than £6bn and shift more of the burden to pensioners, landlords and higher earners.
- Pension industry bodies warn that curbing or scrapping salary‑sacrifice reliefs could reduce take‑home pay, with estimates suggesting a typical worker on £35,000 could lose around £560 a year and smaller tweaks still leaving many worse off.
- The Bank of England reports that pre‑Budget tax uncertainty is already weighing on growth, with firms delaying investment and consumer spending slowing as uncertainty remains very high.
- Labour faces internal tensions after deputy leader Lucy Powell urged sticking to manifesto tax pledges, while any UK‑level income tax change risks political complications in Scotland where rates are set separately.