Chancellor Rachel Reeves 'considering income tax squeeze' in upcoming Budget

Rachel Reeves is considering extending the freeze on income tax thresholds which could push more people into paying higher rates.

The Chancellor is reportedly preparing to prolong the freeze beyond the planned end date of 2028 as she battles to fix the public finances. Thresholds normally rise in line with inflation but imposed a freeze in 2021 to claw back cash after the Covid pandemic.

It means more people are dragged into paying income tax - and higher earners can end up moving to another tax band. People can earn up to £12,570 tax-free, before paying 20 per cent tax on everything between £12,570 and £50,270.

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Income above that is taxed at the higher rate of 40 per cent up to £125,140, after which there is a 45 per cent additional rate.

promised not to raise taxes for working people, including income tax, VAT and national insurance. But the Chancellor could impose an effective tax rise on workers in the Budget on October 30 without technically breaking this vow.

Speaking in Berlin, insisted the Government would keep its manifesto promises. Asked about the idea, he said: "I am not going to pre-empt the individual measures that will be outlined by the Chancellor in due course.

"But I am equally clear that this is going to be a that will fix the foundations and rebuild our country."

Ms Reeves is believed to be considering a raft of tax hikes and spending cuts to plug the £22billion black hole left by the Tories, along with billions of pounds to protect Whitehall departments from real terms cuts. A hike to inheritance tax for the wealthiest Brits is reportedly in her sights, which is charged at 40 per cent on the estate of someone who has died.

This includes property, possessions and money above a £325,000 threshold. Around 4% of deaths result in an inheritance tax charge, which currently raises around £7billion each year.

The Chancellor is also reportedly looking at ending a discount on stamp duty in March to claw back £2billion. The Tories increased the threshold when people begin to pay stamp duty from £125,000 to £250,000, while for first-time buyers it rose from £300,000 to £450,000.

She is also said to be looking at hiking taxes on vapes and raising fuel duty for the first time in 14 years.

The Treasury declined to comment on Budget speculation.

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