If you’re on £46,000 you’re in Reeves’ sights: Chancellor vowed not to raise tax for ‘working people’ but wouldn’t say what that meant…now we know
Rachel Reeves is targeting workers earning £46,000 a year or more in this month’s budget as she tries to plug a £40bn hole in the public finances, while also claiming to keep her promise not to increase taxes on ’employees’.
The Conservatives seized on claims from Whitehall sources that the Treasury had solved the dilemma by defining ‘working people’ as those in the bottom two-thirds of earnings, the equivalent of a salary of £45,000 or less.
This effectively brands the top third as ‘rich’, which includes jobs such as HGV drivers, teachers and head chefs at the Wagamama restaurant chain.
Tory Shadow Business Secretary Andrew Griffith accused the Chancellor of planning to ‘further decimate the take-home pay of millions of hard-working middle earners’.
‘While the Labor Party is increasing the wages of unionized paymasters, they do not understand or care about people who stand up and work hard to make a better life,’ he said.
Sir Keir Starmer has struggled to define ‘working person’ since his election promise not to raise taxes.
At one point he said it meant someone who “goes out and makes a living” and “can’t write a check to get themselves out of a tight spot.”
By defining the period by salary, the Treasury can ensure that income tax or National Insurance increases in the Budget on 26 November will only be £46,000 or more.
Rachel Reeves is targeting workers earning £46,000 a year or more in this month’s Budget as she seeks to plug a £40bn gap in the public finances, while claiming to keep her promise not to increase taxes on ’employees’.
But it will affect 7.2 million workers in the British Army, including teachers with three years’ experience, mental health nurses with less than two years’ experience, site managers, production engineers, yoga instructors, life coaches and captains.
Asked whether higher taxes on the wealthy would feature in her announcement, Ms Reeves said: ‘That will be part of the story.’
Potential tax rises include a raid of up to £4bn on pension benefits for high earners and a 20 per cent tax on Britons leaving the UK for tax havens; this will raise around £2bn.
The announcement comes after claims that up to 16,500 millionaires will leave the UK this year due to tax changes and a lack of confidence in the economy.
Shadow justice secretary Robert Jenrick said the move was a “crazy” idea that would “send wealth and wealth creators running for the door”.
‘We need more entrepreneurs, not fewer,’ he added. ‘Reeves should ignore this last desperate move.’
Professor Andy Summers of the Center for Taxation Analysis, which proposed the policy, said the idea was made possible by Brexit.
‘In the past… the ability to charge settlement fees was constrained by EU rules on freedom of action,’ he added.
Tory Shadow Business Secretary Andrew Griffith accused the Chancellor of planning to ‘further decimate the take-home pay of millions of hard-working middle-income earners’
‘But those rules no longer apply, so we can do what Australia and Canada, as well as many other European countries, have done, now those restrictions have been relaxed.’
As part of the pensions raid, Ms Reeves could target so-called ‘salary sacrifice’ schemes, rolling back tax breaks offered to staff and employers who pay into workplace pensions.
These allow workers to deposit money into their pension funds without being subject to any income tax or National Insurance.
Last week The Mail on Sunday revealed the Chancellor was drawing up plans to impose a ‘mansion tax’ on homes worth £2 million or more.
Officials are still debating whether this will be done through an annual levy or through additional, higher council tax bands.
Economists have warned that Ms Reeves is preparing to raise taxes faster than any chancellor in more than half a century.
Capital Economics said it could increase taxes in the budget by up to £38bn, on top of the £41.5bn it collected last year.
Treasury Secretary Torsten Bell, who is leading budget preparations, has previously advocated sweeping reforms, including ‘matching higher taxes with better taxes’.
A Treasury spokesman said: ‘We do not comment on speculation about tax changes other than financial events.’
