Overview
- Multiple outlets report that Rachel Reeves has notified the Office for Budget Responsibility she intends to raise income tax, in a move that would break Labour’s manifesto pledge.
- A leading option under consideration is a “two up, two down” package: a 2p rise in income tax paired with a 2p cut to employee National Insurance limited to earnings below about £50,270, which the Resolution Foundation says could raise around £6bn.
- Analysts say the shift would shield many working-age employees but increase liabilities for pensioners and landlords, who do not pay employee NI, and leave higher earners paying more overall.
- Reports also point to a new cap on salary-sacrifice pension contributions—around £2,000 a year—so amounts above the cap incur NI, a change estimated to raise up to £2bn and which pension groups warn would cut take‑home pay, citing a £560 annual hit for a typical £35,000 earner sacrificing 5%.
- Political tensions have surfaced, with deputy leader Lucy Powell warning that breaking tax pledges would erode trust, as the Treasury’s plans await formal OBR scoring ahead of the Autumn Budget on 26 November.