Rachel Reeves faces a stark warning from Britain's business leaders as she prepares to deliver Wednesday's Budget: avoid inflicting "death by a thousand taxes" on firms struggling with mounting costs.
The head of the Confederation of British Industry Rain Newton-Smith urged the Chancellor to take tough decisions rather than pile multiple tax rises on businesses. "Raising the headroom to make promises stick, it means one or two broad tax rises, rather than death by a thousand taxes," she said at the CBI's Westminster conference.
The Budget comes as Reeves grapples with a projected £20-30 billion hole in public finances, with the Office for Budget Responsibility set to downgrade growth forecasts for every year of this Parliament. A £20 billion productivity downgrade and the scrapping of a £5 billion welfare savings package have widened the fiscal challenge since March forecasts.
Tax raid plans mount
The Chancellor is considering a sweeping array of tax measures to balance the books. A property levy on homes worth more than £2 million could hit over 100,000 properties, raising £400-450 million according to The Times. Authorities would revalue some 2.4 million properties in the top three council tax bands to determine which face the surcharge.
An extension of the income tax threshold freeze until 2030 looms large, potentially dragging 1.75 million more people into paying tax or higher rates. The Institute for Fiscal Studies estimates a two-year extension would mean 960,000 more people paying income tax and 790,000 pulled into the higher rate.
Reeves is also considering limits on pension salary sacrifice schemes. A pay-per-mile tax for electric vehicles, with consultation expected from 2028, is under review.
The Chancellor plans to extend the benefit fraud crackdown to raise £1.2 billion by March 2031.
Benefits spending surge
Despite the tax raids, Reeves plans to unveil £15 billion in new benefits spending. The Chancellor is expected to scrap the two-child benefit cap entirely at a cost of over £3 billion annually, following pressure from Labour backbenchers who forced her to abandon earlier welfare reform plans.
Working-age benefits will rise 3.8 per cent from April, with Universal Credit payments set for an additional 2.3 per cent boost in 2026 under the Universal Credit Act 2025. Personal Independence Payment, claimed by over 3.8 million people, will increase from £187.45 to £194.55 per week for the highest awards.
The state pension will rise 4.8 per cent under the triple lock, delivering £550 more annually for the full new state pension. This increase, from £230.25 to £241.30 per week, will cost approximately £7.8 billion and benefit 13 million pensioners.
Business pushback intensifies
CBI chair Rupert Soames blasted the Budget preparation as "shambolic," criticizing the constant speculation and policy trial balloons. "This whole run into the Budget has been really difficult and I think that in any future budgets lessons will be learned not to indulge in the constant what's called I think technically pitch rolling [...]," he told Times Radio.
Business Secretary Peter Kyle apologized for the uncertainty. "I'm not apologising on behalf of the people who are reporting on the speculation, because that would be absurd. What I can apologise for is the fact that there has been so much speculation," he told Times Radio.
Pension industry bodies Pensions UK and the Federation of Small Businesses jointly warned Reeves against limiting salary sacrifice schemes. "Limiting salary sacrifice will hit working people trying to save for a better pension in retirement – including those on lower-than-average earnings for whom every penny counts both in working life and at retirement," they wrote.
Pensioner tax surge looms
New analysis by former pensions minister Steve Webb warns that extending the threshold freeze could push 10 million pensioners into paying income tax by 2030, up from 8.7 million today. The frozen £12,570 threshold means anyone on the full new state pension will exceed it from 2027/28 onwards.
"The one bit of good news is that most of these pensioners will not need to fill in a tax return. Any tax due will usually be collected via a tax code on their private pensions or through the 'simple assessment' process [...]," Webb said.
The Chancellor defended her approach, promising to make choices guided by growth and fairness. "Whether it's our commitment to the triple lock or to rebuilding our NHS to cut waiting lists, we're supporting pensioners to give them the security in retirement they deserve," she said.
Note: This article was created with Artificial Intelligence (AI).
