Overview
- Rachel Reeves declined to rule out income tax changes, saying she is still writing the Budget and that no measures have been decided or submitted to the OBR.
- Treasury and No 10 advisers describe a very live debate on headroom, with options including a 1p rise in the basic rate raising about £8bn and smaller yields from higher and additional rates of roughly £2.1bn and £230m.
- Further measures under review include increasing National Insurance for partnership structures at an estimated £2bn, adjusting ISA allowances, and booking planning reform impacts, though these would not close the gap.
- Any increase to income tax would break Labour’s manifesto pledge, drawing internal pressure to target top earners as experts warn top‑rate changes raise limited sums and effective marginal rates near £100,000 are already very high.
- The shortfall is widely put near £30bn after an OBR productivity downgrade worth about £20bn a year, with the IFS estimating Reeves must find roughly £22bn in measures to meet her fiscal rules.