Rachel Reeves Plans Major Tax Hikes This Spring – Here Are the 7 Biggest Targets!

Chancellor Rachel Reeves is reportedly considering another round of tax increases just six months after the last one. With the UK’s financial situation under pressure, here are seven possible tax changes that could affect people and businesses.

1. Higher Income Tax Bills

During the election, Reeves and Prime Minister Keir Starmer promised not to raise income tax, national insurance (NI), or VAT. However, Reeves has already increased employer’s NI.

Now, experts believe she might extend the freeze on income tax thresholds. This means that as wages rise, more people will end up paying higher tax rates. The freeze is currently set to last until 2028, but it could be extended to 2030.

2. Capital Gains Tax Increase

Many expected Reeves to raise capital gains tax (CGT) in her autumn budget, but she didn’t. However, she did increase the CGT rate for lower earners from 10% to 20%.

Now, there is speculation that she may raise the rate for higher earners, making them pay up to 45% CGT. This would affect those selling second homes, businesses, or investments outside of tax-free ISAs.

3. Reversing National Insurance Cuts

Before each budget, the Treasury considers different tax changes. One idea being discussed is reversing the recent 2p NI cut, raising it from 8p to 10p.

This would go against the government’s previous promises, but with finances tight, it’s a possibility.

4. Cutting Pension Tax Relief

Every budget brings rumors that pension tax relief could be reduced. Currently, higher earners can claim 40% or 45% relief, while basic-rate taxpayers get 20%.

Reeves might introduce a flat 25% rate for everyone, saving the government billions. There is also speculation that she could cut the annual pension savings limit from £60,000 to £40,000 or less.

5. Limits on Tax-Free ISAs

A think tank has suggested placing a £100,000 cap on tax-free ISAs. With a former member of this think tank now working with the Chancellor, this idea might become reality.

The government might also consider scrapping the Lifetime ISA, which helps young people save for homes and retirement.

6. Higher Fuel Duty

Despite expectations, Reeves did not increase fuel duty in her last budget. However, this could change soon. Raising fuel tax could bring in £5 billion for the government but would make petrol and diesel more expensive for drivers.

7. Stricter Inheritance Tax Rules

Reeves has already expanded inheritance tax rules to include unspent pensions, private businesses, and farms.

Another possible change could involve removing the seven-year rule for gifts, meaning more people would have to pay tax on money or assets they give to family members before they die.

What Should You Do?

Until the budget is officially announced, these are just possibilities. If you’re concerned about taxes, consider making the most of your pension and ISA allowances now. However, acting too soon based on speculation could have risks, so it’s best to stay informed.