Reeves weighs income tax rise to close fiscal gap in Autumn Budget

Chancellor Rachel Reeves is considering raising income tax in the Autumn Budget on November 26 as part of efforts to close a widening fiscal gap, government and Treasury advisers say. Officials have discussed options ranging from a one penny rise in the basic rate to larger increases and targeted changes to higher bands, alongside measures such as cuts to National Insurance and reforms to pension tax reliefs.

The debate follows a series of downward revisions to economic forecasts and rising debt interest costs that have eroded the Chancellor’s fiscal buffer. Independent estimates of the shortfall vary, with figures cited in government and analyst circles running from about 22 billion to more than 30 billion pounds. Restoring the roughly 10 billion pounds of headroom the Treasury aims to maintain would therefore require substantial revenue or spending adjustments, advisers say.

A one penny increase in the basic rate of income tax would be expected to raise around 8 billion pounds a year, while a 1p rise across all rates has been estimated to yield roughly 10.9 billion by 2029-30. Analysts say a larger move, such as a three penny rise, could be needed to plug the largest...