Rachel Reeves is said to be eyeing up taxpayers once again despite promising no more tax rises after her October Budget.
Experts are warning more tax rises are “highly likely” as the Government prioritises economic growth.
Ministers have declined to repeat Reeves’s promise to business leaders that she was “not coming back with more borrowing or more taxes”.
With rising Government borrowing costs and stagnating economic growth, the Chancellor may feel she has no choice but raise again, with many wondering where she could target next.
1. Lifetime ISAs could be scrapped following a Treasury Committee review.
The scheme allows those aged 18 to 39 to save up to £4,000 annually with a 25 per cent government top-up. Savers can use the funds for their first home or retirement, with potential bonuses of £33,000 over 30 years.
Tim Stovold, expert at Moore Kingston Smith believes the review is the “nail in the coffin” for Lisas. He said: “One of the questions in the Lisa consultation is ‘should we just scrap it?’ Whenever a consultation asks this, it’s softening us up for it to be scrapped.”
Ditching Lisas would raise revenue but leave first-time buyers without support.
2. Pension tax relief reform could be on the Chancellor’s agenda.
The system currently allows basic-rate taxpayers to receive 20 per cent relief automatically, while higher-rate taxpayers can claim up to 40 per cent or 45 per cent.
Reeves wrote in 2016 that a flat rate of 33 per cent would be “a welcome boost for basic-rate taxpayers and a cut in the savings subsidy for higher earners”.
Stovold noted: “Pensions are enormously expensive to the Treasury. Reducing tax relief would be one way of containing it.”
3. Inheritance tax rules could be changed in the Spring Statement.
Wealth advisers warn the seven-year gifting rule is “under threat”. Tax experts report clients are already gifting wealth to family members amid fears the rule could be extended to 10 years or scrapped entirely.
Nimesh Shah said: “People have already taken preventative action on the seven-year front. Reeves could go back to inheritance tax to raise money. One way is to extend it to 10 years or abolish it completely and introduce a lifetime gift allowance.”
Ian Cook, expert at Quilter Cheviot added the gifting rule could be “the next easy target” for the Government.
4. Income tax thresholds could be a prime target for the Chancellor.
Thresholds have been frozen since April 2022 and are scheduled to remain so until 2028. Reeves could extend this freeze, with a two-year extension adding over £8,000 to a higher-rate taxpayer’s bill.
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Sanjay Raja, Deutsche Bank’s chief UK economist, told The Telegraph that extending the freeze was likely in the upcoming Spring Statement.
Nimesh Shah, chief executive of tax advisory firm Blick Rothenberg, said it “wasn’t beyond belief” that Labour could reduce income tax thresholds “given their direction of travel so far”.
5. National Insurance contributions could be another target for the Chancellor.
Jeremy Hunt, the former chancellor, cut the main rate of employee NICs from 10 per cent to eight per cent in last year’s Spring Budget. This followed a previous two percentage point reduction in January 2024.
Shah said reversing Hunt’s cut was the “most obvious area” Reeves would look at to raise funds.
He added: “Reversing the Tory National Insurance cut would be the quickest way to raise the most revenue and the Government would get money quickly in April.”
Stovold explained said higher National Insurance could counter the inflationary effect of public sector pay rises.
A Government spokesman said: “No one should be under any doubt that meeting the fiscal rules is non-negotiable and the Government will have an iron grip on the public finances.
“UK debt is the second lowest in the G7 and only the OBR’s forecast can accurately predict how much headroom the Government has – anything else is pure speculation.
“Kick-starting economic growth is the number one mission of the Government as we deliver on our Plan for Change.
“Over the coming weeks and months, the Chancellor will leave no stone unturned in her determination to deliver economic growth and fight for working people.”
