In the UK‚ theres talk of extending the income tax threshold freeze. Rachel Reeves‚ the finance minister is looking at this option which could last beyond 2028 Its a move that might bring in 7 billion pounds (thats roughly $9.1 billion) each year to the government coffers
This idea comes after Keir Starmer the Prime Minister made a promise before the election in July 2023 He said he wouldnt raise income tax rates or other main taxes. Now‚ the government has to figure out how to make public services better and boost investment without breaking that promise
Someone who knows about Reeves thinking said this plan wouldnt go against Labours tax promises. They only said they wouldnt increase tax rates not the thresholds. When asked about this the Treasury didnt want to say much: “We do not comment on speculation around tax changes outside of fiscal events“
The government is trying to find about 40 billion pounds. They want to do this through tax increases and spending cuts. Most of this money will probably come from higher taxes not from cutting other areas where the government spends money
Heres how income tax works in the UK:
- You start paying 20% tax on income over 12‚570 pounds
- Then its 40% on income over 50‚270 pounds
- And 45% on income over 125‚140 pounds
Income tax is a big deal for the UK government. Last year it brought in 276 billion pounds – thats more than any other type of tax
The idea of freezing tax thresholds isnt new. The previous government did it in March 2021 and then again in November 2022. They said it would last until April 2028. By extending this freeze the government can help balance future budgets without making people pay more right away
This plan fits with how the UK government looks at its budget rules. They focus on what debt and borrowing will look like in five years time. So‚ deciding now to keep the freeze going helps with future budget planning