Budget Day Tensions Rise as Reeves Prepares Major Tax Hikes

A full Budget breakdown will follow later today once the Chancellor delivers her statement

The 2025 Budget is set to land at 12.30pm — and Chancellor Rachel Reeves is preparing to unveil one of the toughest fiscal packages in recent years. With a £30 billion black hole in the public finances, Reeves is expected to announce a series of tax increases and revenue-raising measures designed to stabilise the economy and fund Labour’s public spending commitments.

In a video released ahead of the Budget, Reeves acknowledged the public are “angry at the unfairness in our economy” and “frustrated at the pace of change”, but insisted she will take “fair and necessary choices” to tackle the cost-of-living crisis.

Income Tax Threshold Freeze Extended

One of the headline measures expected today is the extension of the freeze on income tax thresholds for a further two years beyond 2028 — something Reeves previously ruled out, arguing last year it would “hurt working people”.

However, with Labour’s manifesto pledging not to raise income tax rates outright, adjusting thresholds has become one of the few viable levers available.

This extended freeze could raise roughly £8 billion, contributing meaningfully to the fiscal repair job.

Confirmed Measures Already on the Table

The government has signalled several tax rises and cost-saving policies in advance of the Chancellor’s full statement. These include:

• Allowing local authorities to introduce a tourist levy on overnight stays
• Expanding the sugar tax to include packaged milkshakes and flavoured lattes
• Imposing additional taxes on higher-value properties
• A likely cap on tax-free salary-sacrifice schemes
• A tax increase for gambling companies
• A new pay-per-mile charge for electric vehicles

Reeves will also set out Labour’s growth agenda, promising the “biggest drive for growth in a generation” supported by investment in infrastructure, housing, defence, education and skills.

A Difficult Economic Backdrop

The Chancellor says the UK is in a far worse position than previously believed due to:

• Lower productivity forecasts
• Reversals on welfare and winter-fuel-allowance cuts
• Ongoing global instability
• A legacy of “austerity, a chaotic Brexit and the pandemic” that damaged long-term economic resilience

Despite this, Reeves insists the Budget will prioritise stability, including more NHS funding, efforts to tackle waste in public services and measures to bring down the national debt.

New Spending Plans and Household Support

Expected announcements include:

• A rise of £550 a year in the state pension for 13 million pensioners
• A freeze on prescription charges and rail fares
• An additional £5 million for secondary school libraries
• £300 million for upgrading NHS technology and expansion of neighbourhood health hubs
• Retaining the 5p cut in fuel duty
• Extending the Electric Car Grant by a year, giving buyers £3,750 off new EVs

Labour MPs also hope Reeves will announce a partial or full uplift of the two-child benefit cap, which supporters argue would significantly reduce child poverty.

Fierce Political Backlash Ahead of the Statement

Opposition parties have condemned the expected tax hikes.
Conservative shadow chancellor Mel Stride accused Reeves of breaking promises and handing the bill to “hardworking families”. Liberal Democrat deputy leader Daisy Cooper warned the UK is stuck in a “cost-of-living permacrisis”, while the SNP urged Reeves to “help families rather than hammer them”.

We will publish a full, detailed breakdown of the Budget later today after the Chancellor delivers her statement.

Sources: (SKY.com, BBC.co.uk, FT.com)