When Labour published its 2024 election manifesto, Rachel Reeves promised a break from “years of Tory chaos”, pledging stability, growth, and no tax rises for “working people”.
That meant no increases to income tax, national insurance, or VAT, while closing loopholes and ensuring the wealthiest “pay their fair share”.
Eighteen months on, those pledges are under pressure. The Chancellor faces a looming black hole in the public finances, with economists estimating a shortfall of up to £40bn.
Slower economic growth, rising borrowing costs, and a series of policy U-turns — including restoring winter fuel payments and scrapping planned cuts to disability benefits — have all widened the gap.
Reeves has also admitted that the Treasury is considering both tax rises and spending cuts in the Budget.
In her first interview since receiving a briefing from the Office for Budget Responsibility (OBR), Reeves told Sky News that “of course” tax and spending are under review. On 3 October, the Chancellor reviewed a draft of the OBR’s fiscal report, which will specify the extent of the fiscal gap she plans to address on 26 November.
She said: “Of course, we’re looking at tax and spending as well. I was really clear during the general election campaign – and we discussed this many times – that I would always make sure the numbers add up.”
With her Budget looming, Reeves must balance the books while trying to stick to her manifesto promises. Every tax commitment is under scrutiny, and the choices she makes could shape both the economy and Labour’s political fortunes.
Here’s what Labour has promised on tax, and how that could change in the Budget.
Income tax
Manifesto pledge: Labour promised not to raise the basic, higher or additional rates of income tax, saying it would not “ask working people to pay more”. The manifesto did not mention threshold freezes.
What’s happened so far: The basic rate remains at 20 per cent, the higher rate at 40 per cent and the additional rate at 45 per cent. However, Reeves has continued the freeze on thresholds first introduced under the Conservatives, meaning more people are being drawn into higher tax bands as wages rise, a phenomenon known as fiscal drag.
What could change at the Budget: A panel of top economists assembled by The i Paper last month suggested that rather than making minor adjustments and changing smaller taxes, the Chancellor should consider increasing income tax, as they believe this would have the “least negative” effect on economic growth.
Reeves could also opt to extend the freeze on income tax thresholds beyond 2028. The Institute for Fiscal Studies (IFS) estimates that prolonging it to 2030 could raise around £10bn a year, though the think-tank said such a move would “breach the spirit” of the manifesto.
A direct increase in rates would be politically explosive, but if fiscal conditions worsen, Reeves could argue that the economic context has changed since the election.
National insurance
Manifesto pledge: Labour promised not to raise national insurance contributions for employees or the self-employed, presenting this as part of its wider promise not to raise taxes on working people.
What’s happened so far: The Government has maintained the pledge so far. But because the manifesto was silent on employer contributions, Reeves announced an increase last year, raising the rate from 13.8 per cent to 15 per cent on salaries above £5,000. She argued that this did not breach the commitment, since it does not appear directly on workers’ payslips.
What could change at the Budget: Further rises in employer contributions are considered unlikely after business groups warned they could deter investment.
The Resolution Foundation think-tank has suggested a “tax switch” — lowering national insurance by 2 per cent while raising income tax by the same amount — to spread the burden more fairly. However, that could risk blurring the line between maintaining and breaking Labour’s pre-election promise.
VAT
Manifesto pledge: Labour said it would not increase the main rate of VAT, which stands at 20 per cent, or extend the tax to essential goods and services.
What’s happened so far: The headline rate has been maintained, but Reeves applied VAT to private school fees from January 2025, closing a long-criticised exemption. The Chancellor has framed the move as consistent with Labour’s pledge, targeting privilege rather than broad consumption, but the move has still faced significant backlash.
What could change at the Budget: Raising the main rate of VAT would risk fuelling inflation and breaking a clear manifesto line, making it highly improbable.
More feasible would be a review of zero-rated and reduced-rate items — for example, ending outdated exemptions or modernising definitions. Any such step would likely be presented as a simplification rather than a tax rise.
Capital gains tax
Manifesto pledge: Labour said it would close loopholes and ensure those “with the broadest shoulders” contribute more, without committing to raising capital gains tax (CGT) rates.
What’s happened so far: The Government has closed the private-equity carried-interest loophole, so these gains are now taxed at a blended rate closer to income tax. Reeves has also ordered reviews of business asset reliefs and share-option schemes, signalling a wider reform of CGT.
What could change at the Budget: Reeves could narrow the gap between CGT and income tax, reduce the £6,000 annual exemption, or restrict certain reliefs.
The IFS estimates that these measures could raise several billion pounds while targeting higher earners rather than ordinary homeowners. Changes could also focus on very high-value properties, such as homes above £1.5m, generating revenue without affecting most people.
Inheritance tax
Manifesto pledge: Labour vowed to end the use of offshore trusts to avoid inheritance tax and to ensure that everyone resident in the UK pays on their global assets.
What’s happened so far: The Government is implementing these reforms alongside the abolition of the non-dom regime. Some unused pension savings are also being brought into scope. Reeves has framed the changes as fairness measures rather than revenue-raising.
What could change at the Budget: The Chancellor could further restrict reliefs for agricultural or business property and reduce the tax-free allowance from £325,000. Analysts say tightening exemptions could raise up to £6bn, though it would provoke backlash from farmers and family-owned firms.
Pension tax relief
Manifesto pledge: Labour did not make a specific commitment on pension tax relief but said it would maintain fairness and simplicity in the system.
What’s happened so far: Reeves has reportedly been reviewing pension tax relief, which lets people deduct contributions from their taxable income at their marginal rate. This means higher earners receive far more generous support than basic-rate taxpayers, a system the IFS has long criticised as regressive.
Some experts have suggested that restricting relief at higher rates could raise revenue with minimal impact on low- and middle-income savers, though it would be politically sensitive.
What could change at the Budget: The Chancellor could introduce a flat 20 per cent relief for all savers or apply relief only to contributions above £2,000 per year.
The IFS has previously suggested this could raise several billion pounds while still encouraging saving. The move would likely be unpopular with wealthier savers but would make the system fairer, reducing the advantage enjoyed by the highest earners.
Your next read
square POLITICSExtra tax on builders’ rubbish could be scrapped to help hit 1.5m homes target
square INFLATIONWater and energy bills set to keep inflation as high as 3.4%, IMF warns
square PENSIONSReducing pension tax-free lump sum to £100k a ‘high risk’, Reeves warned
square STAMP DUTYThe options to replace stamp duty – and how it could affect you
Hence then, the article about what labour has promised on tax and how that could change in the budget was published today ( ) and is available on inews ( Middle East ) The editorial team at PressBee has edited and verified it, and it may have been modified, fully republished, or quoted. You can read and follow the updates of this news or article from its original source.
Read More Details
Finally We wish PressBee provided you with enough information of ( What Labour has promised on tax – and how that could change in the Budget )
Also on site :