Rachel Reeves looks set to raise taxes in the autumn budget. What does it mean for you?

Rachel Reeves looks set to increase taxes in her autumn budget. She has claimed that the state of the UK economy has left her with little wiggle room, and it is widely speculated that this means the government will take more of our monthly earnings.

The chancellor has reportedly told the budget watchdog, the Office for Budget Responsibility (OBR), that she plans on raising income tax. This will come alongside other “major measures” on tax and spending that she is preparing to announce in her autumn budget on 26 November.

Reeves had strongly suggested the government planned to increase taxes but was deliberately vague in her unusual early briefing on Tuesday (4 November). She warned that the UK has faced financial challenges in the last year which no one predicted and that she has had to make “hard choices”.

“If we are to build the future of Britain together, we will all have to contribute to that effort,” Reeves said. “Each of us must do our bit for the security of our country and the brightness of its future.”

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But what does all this mean for our finances? Experts agree that Reeves has few options but to raise taxes, although there are a number of ways she could do this.

Funmi Olufunwa, a personal finance expert, former lawyer and founder of Hoops Finance, says: “We have been told that there is this hole in the public purse that needs to be filled. And to me, you’ve only got a few choices, you either increase taxes, you decrease spending, or you do a bit of both. 

“But what Reeves has been clear about is that she doesn’t want to borrow to fund that gap. She wants to maintain the fiscal rules that she herself has set. In that strange pre-budget briefing, she said the fiscal rules were ironclad. I’d be surprised if she changes her mind on that. With that in mind, I think the only other options are tax rises or spending cuts.”

YouGov polling, updated weekly, shows that 76% of Brits think that the government is handling tax badly. That is almost the highest figure seen since 2019, with the only exception being the last two weeks of October 2022, when the Conservatives were about to announce their autumn budget at the height of the cost of living crisis. Then, 78% of Brits thought the government was handling tax badly.

In Labour’s election manifesto pledge, the party promised not to increase income tax, national insurance or VAT. But Reeves has said that the financial situation that Labour inherited from the Conservatives was worse than anticipated. Then global events, including the ongoing war in Ukraine and Donald Trump’s threat of tariffs, contributed to the economy deteriorating further.

Reeves was asked repeatedly by journalists about whether she remained committed to the manifesto pledges not to raise taxes, and she was unable to confirm. Olufunwa says that the “easiest” option for the chancellor would be to raise income tax across the bands by 1% or 2% – because that is both ”simple” to administer and ”easy for people to understand”.

More than half of tax intake comes from income tax, national insurance and VAT. Together, they raised around £649 billion in 2024/25, so a small increase in these could generate a significant amount of cash for the government. But it would likely be unpopular.

Just 14% of Brits support an increase in VAT, while 22% back increases in national insurance or the basic rate of income tax, according to further YouGov polling.

By comparison, the vast majority of people (75%) support a 1% wealth tax on assets above £10 million plus a 2% on assets above £1bn. Nearly as many people (69%) support a tax on homes worth more than £2m.

Jake Atkinson, campaign and movement manager at Tax Justice UK, said: “Rachel Reeves can’t afford not to raise taxes at the budget with living standards down the drain and the country desperate for investment. But who pays those taxes is important because millions are already struggling to get by. The government pledged not to raise taxes on working people and they don’t have to.”

Tax Justice UK is calling for the “super-rich and powerful” to be “made to pay their fair share”. It has found that a tax of 2% on assets over £10m could raise up to £24bn a year. This could be used to invest in “the things we all care about: thriving communities, good jobs, safe homes and a future we can look to with hope”.

Stephanie Brobbey, former private wealth lawyer and founder and chief executive of Good Ancestor Movement, points out that this wealth tax would affect just 20,000 people. That is roughly the size of the O2 arena – compared to the 40 million income tax payers who would be impacted by an income tax rise.

Brobbey said: “When work is no longer a route out of poverty in the world’s sixth richest country due to astronomical cost of living, it is completely out of touch to make working people responsible for rebuilding our country.”

She suggested the government could also introduce national insurance contributions on investment income, such as dividends from shares, rent from property, and interest on savings. She would also like to see capital gains gains tax rates equalised with income tax, which she claimed could raise £12bn.

Tax Justice UK is similarly calling for capital gains tax to be reformed and for income from investments to be treated the same as earnings. 

“This may mean a little less profit for people like landlords and wealthy asset owners. But right now they’re already paying lower tax rates than the people keeping this country running, like nurses, carers and factory workers,” Atkinson said.

The chancellor has consistently ruled out imposing a standalone wealth tax. The Institute for Fiscal Studies (IFS) warns against an annual wealth tax too, claiming that it would come with “huge practical challenges“, would “penalise savings“ and “would not be a well-targeted way to tax the large returns that wealth can generate“.

The IFS argues that if the chancellor wants to raise more from the rich, a better approach would be to fix existing wealth-related taxes.

Another argument against taxing wealth is that rich people may move elsewhere, such as Jersey, which is considered a tax haven, or the United Arab Emirates. 

Former England footballer and pundit Rio Ferdinand recently spoke to LBC about his decision to move to Dubai with his family, saying: “If the health service and whatnot was absolutely flying and working perfectly well, then I think people paying tax don’t mind.

“But when there’s things falling apart and things going wrong in the country, you think: ‘We pay towards tax and is it really going towards the things that are benefitting the people that live here?’ That’s the big question.”

It is estimated that Ferdinand’s personal wealth is around £57m – but his view on taxes isn’t uncommon. The recent British Attitudes Survey found that “the majority of voters do not trust the government to spend money well”, and people want to understand why they are paying more tax.

Alex Chapman, senior economist at the New Economics Foundation, said: “Right now our tax system is not working. Very rich people pay less tax on their wealth than people who are working jobs to make ends meet. It’s time for this government to decide whose interests it serves and ask those with the broadest shoulders to pay what they owe.”

The New Economics Foundation is calling on the government to raise capital gains tax and build HMRC’s ability to know where high levels of wealth are held, in order to allow the government to design better-targeted wealth taxes in the future. Beyond this, it wants the government to tax ultra-frequent flyers and private jets with higher carbon taxes so people pay for their own pollution.

“We are facing an aging population and climate breakdown,” Chapman said. “For any government to tackle these challenges, taxes across the whole population will have to rise. But for the public to accept these tax rises, they have to start with the wealthiest and with polluters, and any money raised has to be put back into the public services which keep our society functioning.”

Chapman also questioned whether the “so-called black hole in our public finances really exists or whether it is an artefact of the government and the OBR’s accounting practices”. 

“Instead of raising taxes to just plug the mythical ‘gap’, any new money this government can raise should go straight to rebuilding the health and resilience of people and communities,” he said.

Now that the Treasury has informed the OBR of its plans in the budget, the forecaster will make an assessment on the impact of these measures and report back. The Times reports that this is the penultimate round of forecasts before the autumn budget, meaning that Reeves could still change her mind about any tax rises.

People will have to wait for the autumn budget to learn exactly how the chancellor intends to raise taxes. Until then, Olufunwa encourages people to make sure they are getting all the financial support they are entitled to. More than £24bn in benefits is currently going unclaimed annually, according to recent research from Policy in Practice.

Olufunwa also advises people not to make any impulsive financial decisions that cannot be undone before announcements in the autumn budget. Most changes made in the budget will not come into effect until April.

“People want to see policies that will mean a better future for them and their families,” Olufunwa said. 

That means higher incomes, better public services, growth in the economy to create more jobs and opportunities, more housing, and a stable tax system so people can plan effectively for their future. But the chancellor needs money to achieve all of that.

“I wouldn’t want to be in her position,” Olufunwa added.

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