Rachel Reeves Slammed for £26 Billion Tax Bombshell
Chancellor Rachel Reeves has ignited fury with a whopping £26 billion tax package in her latest budget. Barely a year after promising no sneaky tax hikes, she’s broken her word by freezing income tax thresholds until 2031. This move drags 1.7 million workers into higher tax brackets thanks to inflation-fuelled “stealth tax creep”.
Reeves’ U-turn shocks after her vow last year at the CBI conference: “I am keeping every single promise on tax, no extension of the freeze in income tax and National Insurance thresholds.” Critics brand the plan a “stealth raid” on workers, pensioners, and savers — all while welfare spending balloons by £15 billion a year.
Income Tax Freeze: Millions Squeeze Harder
The personal allowance sticks at £12,570 and the higher rate threshold stays frozen at £50,270 — extended three extra years beyond 2028. This sneaky tax hike will rake in an extra £8 billion a year by 2029 as inflation pushes salaries into higher tax bands.
- 780,000 more workers dragged into basic-rate tax
- 920,000 forced into the higher-rate tax bracket
- Minimum wage earners to pay an extra £137 tax yearly by Parliament’s end
Pensioners suffer too. From 2027, full state pensioners earning £11,502 a year will pay income tax for the first time. The threshold rises just to £241 a week in 2026, forcing lifelong contributors to cough up.
Darren Jones, Treasury Chief Secretary, admitted on Sky News: “Practically, yes. If their pay goes above the threshold, they pay more.”
Council Tax Shock for Southern Homeowners
Reeves also blindsided voters with plans to revalue pricey homes in Council Tax Bands F to H — affecting 2.4 million homes worth more than £212,000 in 1991 prices. And a new mansion tax will hit 310,000 properties over £2 million, mainly in London and the South East.
Homeowners could see council tax bills rocket by up to £10,000 a year. Property guru Kirstie Allsopp warns of a “cliff edge” just under £2 million sparking battles with tax inspectors over valuations.
This blatantly breaks Labour’s 2024 manifesto pledge of “no banding changes” to Council Tax. While pensioners might defer payments, younger homeowners face the bill now. The move could fetch up to £2 billion when values are updated.
Pension Savers Take Another Hit
Reeves followed Gordon Brown’s infamous pension raid, capping National Insurance relief on pension salary sacrifice contributions at £2,000 annually. Workers previously enjoyed unlimited relief on contributions.
Experts warn a £40,000 earner could lose up to £20,000 in pension savings by retirement.
The Fairness in Savings Union said this “erodes saver confidence” and could discourage people from contributing to pensions.
The Treasury expects to pocket £2 billion a year from the cut — another blow to middle earners. The 25% tax-free pension lump sum survives for now but offers little consolation.
Two-Child Benefit Cap Scrapped — But Critics Speak Out
On the spending side, Reeves scrapped the Tory-era two-child benefit cap, costing up to £3.6 billion annually and lifting half a million children out of poverty. Alongside a 4% benefit rise from April 2026 and partial winter fuel payment restoration, welfare spending soars by £15 billion yearly.
The move meets Labour backbench demands but sparks criticism from those who say the money should cut taxes for working families instead.
Broken Promises Timeline
- Oct 30, 2024: “No extension of the freeze” – CBI speech
- Oct 31, 2024: “No more taxes” – Times Radio
- Nov 25, 2024: “No more taxes or borrowing” – CBI
- Dec 3, 2024: “Never another budget like that” – Parliament
- Jun 12, 2025: “Wait for OBR forecast” – BBC interview
- Sept 29, 2025: “World has changed, must protect stability” – Radio 4
OBR Leak Adds To Pressure
Adding to Reeves’ headache, the Office for Budget Responsibility (OBR) leaked its 197-page economic forecast 30 minutes before her Commons speech. It slashed GDP growth forecasts for 2025 and 2026 while warning debt is rising faster than expected.
Shadow Business Secretary Andrew Griffith called the leak “shocking” and suggested it was timed to soften market fallout. Government bond yields dipped slightly after the leak.
Tory and Public Fury Hits Fever Pitch
Conservative leader Kemi Badenoch tore into the Budget as “tax rises dressed as necessity,” demanding spending cuts instead of more taxes.
Shadow Chancellor Mel Stride raged at Reeves for “reneging on working people.” He warned the post-war record tax burden of 37.4% of GDP by 2029 shreds Labour’s worker-friendly image.
Online outrage exploded under #ReevesRaid, racking up 20,000 tweets within hours. A YouGov poll revealed Labour support plummeting to 22%, while Nigel Farage’s Reform UK surged ahead at 28%.
Reeves blames Tory debt, Brexit fallout, and global instability. But voters are left wondering: does Labour really understand the pinch on working families?
What Lies Ahead?
- Corporation tax stays fixed at 25% to reassure businesses
- A £1 monthly nuclear levy to fund Sizewell C power station
- Promises of high street business rate reforms
Reeves brands these “hard choices” to fix public services and steady the economy. But with rising taxes, slowing growth, and broken promises, Labour faces a tough battle to win back trust.
