Rachel Reeves lays groundwork for tax rises in Budget

Chancellor Rachel Reeves laid the groundwork for tax rises in her upcoming Autumn Budget this morning, in a pre-Budget speech about the state of the economy.

Ms Reeves painted a bleak picture of the nation’s finances before saying she would make “necessary choices” in the Budget to “deliver strong foundations for the economy”.

She then dodged several questions from political journalists about whether she intended to raise taxes on working people – income tax, National Insurance or VAT – in the Budget.

That’s despite Labour previously pledging not to raise those taxes in its election manifesto.

It suggests the “necessary choices” could come in the form of tax rises – which will come as a huge blow to people struggling with the cost of living.

Image: By Jacob Diehl

What will a tax rise mean for you?

While Ms Reeves’ speech may have been intended to attract some sympathy and understanding from the public, it will come as no comfort to families already struggling to make ends meet.

The Guardian has previously suggested that the government is considering a 1p increase to the basic rate of income tax, paid on earnings between £12,571 and £50,270.

Here is what a 1p income tax rise would mean for people on various incomes:

Source: AJ Bell

How to avoid tax rises:

One of the best ways to keep more of your income is to redirect more of your earnings into your pension. Money put into your pension is tax-free, so you get to keep the extra rather than giving it to HMRC.

Be aware that the current standard annual allowance – the amount you can put into your pension each year – is £60,000, but it can be lower for high earners. However, you can ‘carry forward’ any unused allowance from the three previous tax years if you need to put a lot away in one year.

Saving your money into an ISA can help you keep more of your savings. Interest or returns earned inside an ISA are tax-free, so you get to keep every penny.