Reeves signals tax raid on wealthy as economy stalls

Chancellor Rachel Reeves during her recent visit to discuss infrastructure projects amid ongoing economic challenges. (Illustrative image) (Photo by Stefan Rousseau - WPA Pool/Getty Images) Getty Images

Chancellor Rachel Reeves has signalled that those with the "broadest shoulders" will bear the brunt of tax increases in the upcoming Budget. Her asset-based approach to taxation has sparked fears that property, pensions, and savings could be targeted as the Government seeks to fill fiscal gaps.

The Chancellor drew a distinction between specific wealth taxes, which she has ruled out, and measures that "do tax wealth and do tax wealthy people." This has intensified speculation about inheritance tax increases and pension reforms affecting higher earners.

Pension schemes in the firing line

Pension tax changes are under active consideration for the autumn Budget, with salary sacrifice schemes facing potential restrictions. The current system of pension tax reliefs cost the Treasury £23.5bn in 2023/24, according to analysis from Birmingham-based sources.

Officials are reportedly examining a flat rate tax relief at 30 per cent to replace the current system that benefits higher earners more generously. The £268,275 cap on tax-free pension lump sums could also face reductions as part of the overhaul.

Economic pressures drive tax strategy

The UK economy effectively stalled over the summer, growing by just 0.1 per cent in August after contracting 0.1 per cent in June. This economic stagnation has increased pressure on the Chancellor to find new revenue sources.

Business confidence remains fragile with investment decisions delayed due to Budget uncertainty. Experts warn that speculation ahead of the Budget announcement could further dampen economic growth.

Opposition sounds alarm

Shadow Chancellor Sir Mel Stride warned that "under Labour nothing is safe. Not your home, not your pension, not your savings." He called on Reeves to show "real backbone" and control Government spending rather than "shaking down the taxpayer again."

The Institute of Chartered Accountants has cautioned that Britain faces a "damaging cliff edge" if the Chancellor raids businesses again. The warning comes as inflation remains elevated at 3.8 per cent, with the IMF predicting the UK will face higher inflation than other leading economies.

Sources used: "Daily Mail", "Express", "Liverpool Echo", "Birminghammail" Note: This article has been edited with the help of Artificial Intelligence.