Rachel Reeves has indicated that those with substantial assets will face higher taxes in the upcoming Budget, as concerns mount over potential raids on property, pensions and savings.
Speaking at the International Monetary Fund’s annual meetings in Washington, the Chancellor emphasized that people with the “broadest shoulders” should contribute more, laying the groundwork for targeting wealth rather than income.
The comments came as official figures revealed the economy grew by just 0.1 per cent in August, following a 0.1 per cent contraction in June, showing the UK economy effectively stalled over the summer months.
Wealth vs Income
When asked to define a wealthy person, Ms Reeves drew a clear distinction between earnings and assets. “Wealth is obviously different from income. So wealth is not about your annual salary,” she said.
While ruling out a specific wealth tax, the Chancellor pointed to last year’s Budget measures as examples of her approach, including VAT on private school fees, the abolition of non-dom status, and increased taxes on private jets.
The remarks suggest inheritance tax, pension schemes and buy-to-let landlords could face higher levies as the government seeks to raise tens of billions of pounds.
Budget Pressures Mount
Ms Reeves faces the challenge of filling a substantial financial shortfall whilst meeting her fiscal rules. The Institute of Fiscal Studies estimates around £42 billion may need to be raised to provide adequate headroom and avoid repeating previous budget crises.
The Chancellor acknowledged she wants greater flexibility against her targets, stating: “More headroom requires more tax revenue or less spending on public services like the NHS. So you’ve got to get the balance right there.”
This represents a reversal from her earlier promise not to return for additional tax rises following last year’s £40 billion tax-raising Budget.
Business Concerns
A new survey from the Institute of Chartered Accountants in England and Wales reveals firms are preparing for job cuts, price increases and reduced investment if further tax rises materialize.
Chief executive Alan Vallance warned: “Britain faces a damaging cliff edge if the Chancellor decides to raid businesses again at next month’s Budget. Business confidence is fragile, investment is stalling, and everyday decisions are slowed by complexity, cost and uncertainty.”
Whitbread’s chief executive Dominic Paul also cautioned against additional “punitive” tax increases, noting that Labour’s workers’ rights legislation was already making growth more challenging.
Taxi Tax Speculation
Labour has declined to rule out applying VAT to private hire vehicle fares, sparking speculation about a potential taxi tax in the Budget. Industry experts predict such a measure could raise £750 million annually but would add £2 to £3 to a typical £12 journey.
Shadow transport secretary Richard Holden warned the move would disproportionately affect rural residents, people with disabilities and the night-time economy.
Treasury Minister Dan Tomlinson said the government was “carefully considering” responses to last year’s consultation on VAT treatment of private hire vehicles.
Cost of Living Measures
Despite the tax-raising focus, Ms Reeves promised “targeted action to deal with cost of living challenges” in the Budget. Reports suggest potential cuts to VAT on fuel bills, currently at five per cent, which could save households £86 annually but cost the Treasury up to £1.75 billion.
Another option under consideration is reducing green levies on energy bills, which currently cost families over £200 per year.
The Chancellor acknowledged inflation remains “too high” at 3.8 per cent in the 12 months to August, with the IMF projecting UK inflation will exceed other leading economies this year and next.
Average household energy bills rose to £1,755 this month after Ofgem increased the price cap by two per cent, whilst Octopus Energy warned electricity prices could rise 20 per cent within five years without policy changes.
Political Response Shadow chancellor Sir Mel Stride criticized the government’s approach: “Under Labour nothing is safe. Not your home, not your pension, not your savings. Rachel Reeves should show some real backbone and control Government spending – that includes cutting the welfare bill – rather than shaking down the taxpayer again.”
