Rachel Reeves is set to freeze income tax thresholds again in a move which would raise billions of pounds in the Budget and leave millions paying more tax.
The Chancellor is considering the policy after concluding that it would not break Labour’s manifesto promise not to increase income tax.
The thresholds at which people start paying the basic, higher and additional rates have been frozen since 2021.
They are due to start rising with inflation again each year from 2028, but Reeves is expected to announce in the Budget on 30 October that this deadline will be pushed back again by one or two years.
A senior Government source told i the move would not breach the general election manifesto, which contained a promise not to increase the rate of income tax to avoid imposing a burden on “working people”.
A one-year freeze would raise around £7bn extra a year, a boost for the Chancellor as she seeks to increase taxes in order to avoid cutting public spending.
Keeping the thresholds at £12,570 for the 20p basic rate, £50,270 for the 40p higher rate and £125,140 for the 45p additional rate would mean taxpayers getting pushed into a more punitive income tax band as their salaries increase in line with inflation.
It would also see pensioners who are wholly reliant on the state pension pay ever more tax, because the “triple lock” means that pensions are guaranteed to increase by a minimum of 2.5 per cent each year.
