Rachel Reeves personal tax allowance threshold update as plan emerges | Personal Finance | Finance

Rachel Reeves is reportedly preparing to freeze thresholds for another two years after abandoning plans to increase income tax in the budget with measures to be announced on November 26. It could also introduce a new tax on high-value properties.

The Chancellor was expected to raise income tax to address the significant shortfall in his spending plans, and as recently as Monday suggested the alternative could be “deep cuts” to public investment.

However, the Labor Party abandoned this plan, which would have violated the commitment of its manifesto.

Ms Reeves is understood to have made a U-turn following improved forecasts from the Office for Budget Responsibility, but other tax increases have not been ruled out.

Restrictions on salary sacrifice schemes and new measures to tax electric vehicles are still being considered as the Treasury adopts a “buffet” approach to raising a range of smaller taxes.

Reports suggest the Chancellor will extend the freeze on income tax thresholds for two years until 2030, which could bring in around £8bn a year to the Treasury.

It could impose a new tax on some of the most expensive homes, particularly affecting properties in London and the South East, according to The Telegraph.

This will reportedly lead to a revaluation of the 2.4 million most valuable properties in council tax bands F, G and H, of which 300,000 will be subject to a new, separate surcharge on top of their existing council tax bills.

A Treasury spokesman said: “We do not comment on speculation about tax changes other than financial events.”

Despite the U-turn on income tax, the Chancellor still plans to give himself wider fiscal leeway; this is a safety net against economic turbulence that could affect the Government’s spending plans.

Ms. Reeves has been laying the groundwork for tax increases in recent weeks, including in an early morning speech on Nov. 4 to prepare people for the budget.

Downing Street confirmed on Friday that the substance of the speech remained valid.

The Prime Minister’s official spokesman said: “He has been very clear about the challenges facing the country and his priorities in tackling those challenges.

“All this still remains.”

The spokesman declined to comment on budget speculation but said the Chancellor aimed to “create more resilient public finances with room to withstand global turbulence”.

Government borrowing costs rose on Friday as speculation about a change in direction triggered a sell-off in gilts, but the market later stabilized somewhat as the reasons behind the Treasury’s decision-making emerged.

Helen Miller, director of the Institute for Fiscal Studies (IFS) think tank, said it was “not unusual” for chancellors to make last-minute changes to their Budget plans.

He added: “But news that Rachel Reeves has backtracked on her plan to raise income tax rates will cause investors to worry that the Chancellor will instead raise a series of smaller taxes that could further damage economic growth.

“They may also be concerned that the change in plans signals that this Government is unwilling to do politically difficult things.

“These are the kinds of concerns that could lead investors to demand higher returns when lending to the Government.”

The IFS chief said that if the Government chooses to raise a range of smaller taxes, they should be reformed “to be less detrimental to growth”.