Huge Rachel Reeves warning as ‘new wave of stealth taxes’ incoming – £20bn hole
Rachel Reeves is set to increase so-called stealth taxes, an expert has warned (Image: Getty)Brits are to be hit by a new wave of "stealth taxes", a finance firm has warned. The move is likely to be in the Chancellor, Rachel Reeves's next Budget, as mounting fiscal pressures force the Government to raise revenue without headline tax increases, the deVere Group said. “The UK’s debt interest is close to £100bn, growth is stuck below 1%, and spending—especially defence—is moving materially higher," the company's regional director, James Green, said.“This combination leaves a hole of what is likely to be around £20bn. The money has to come from somewhere.” Higher borrowing costs have significantly increased the cost of servicing government debt, experts say, much of which is linked to inflation or short-term refinancing.At the same time, subdued economic growth is limiting the pace at which tax receipts are increasing across income tax, VAT and corporate revenues, they added.Tax thresholds have already been frozen until 2028 (Image: Getty)In addition, spending pressures remain elevated, and the Government's pivot towards higher defence spending, alongside continued demands in healthcare and welfare, adds to the overall strain on the public finances, specialists said.“No single pressure explains it,” Mr Green said.“But together, they leave very little room. That’s why stealth taxes move to the front.”Borrowing is constrained and large-scale spending cuts are politically difficult, Mr Green added, which means Ms Reeves is likely to rely on "stealth taxation" – raising revenue through measures that do not involve headline rate changes, but steadily increase the overall burden.The most immediate lever is fiscal drag, he thinks.Income tax thresholds are already frozen until 2028, and extending that this would continue to pull more taxpayers into higher bands as wages rise.“Freezing thresholds for longer is one of the easiest ways to raise billions,” Mr Green said.“People earn more on paper and hand more over, without any announcement of a tax rise.”As regards specific taxes, the capital gains levy exemption and the dividend allowance could be held at current levels or adjusted further, increasing the proportion of investment returns subject to tax, Mr Green suggested.In addition, pension tax relief is another area that could be refined, the expert said, as even relatively modest adjustments to reliefs or limits could generate additional revenue.Moreover, inheritance tax is expected to expand through continued threshold freezes, and national insurance will contribute through threshold stagnation, Mr Green said.Finally, council tax increases or gradual adjustments to property bands would allow revenue to rise in a more distributed way, he added.
