Chancellor Rachel Reeves has been slammed for betraying working people with a massive £26 billion tax package in her latest budget. Breaking a key manifesto pledge made barely a year ago, Reeves announced she’d freeze income tax thresholds until 2031, dragging 1.7 million more workers into higher tax brackets through inflation tax creep.
The move is a shock U-turn from her vow at last year’s CBI conference where she insisted: “I am keeping every single promise on tax, no extension of the freeze in income tax and National Insurance thresholds.” Critics call it a “stealth raid” hitting workers, pensioners, and savers while welfare spending balloons by £15 billion yearly.
Income Tax Freeze: Millions Squeezed Harder
The personal allowance stays locked at £12,570, and the higher rate threshold stuck at £50,270 — extended three more years beyond 2028. This stealth tax rise will rake in £8 billion a year by 2029, as wage inflation pushes millions into steeper tax bands without threshold hikes.
- 780,000 more workers will pay basic-rate tax
- 920,000 will get caught in the higher-rate net
- Minimum wage earners face an extra £137 tax a year by parliament’s end
Pensioners are hit brutally. From 2027, full state pensioners (£11,502/year) will have to pay income tax for the first time. The threshold rises to just £241 a week in 2026, forcing lifelong contributors to cough up to HMRC.
Darren Jones, Chief Secretary to the Treasury, admitted on Sky News: “Practically, yes [it’s a tax rise]. If their pay goes above the threshold, they pay more.”
Council Tax Hike Hits Southern Homeowners
Reeves also rocked voters by planning a revaluation of expensive homes in Council Tax Bands F to H — affecting 2.4 million homes valued above £212,000 in 1991. On top of that, a new mansion tax hits 310,000 properties worth over £2 million, mostly in London and the South East.
Homeowners could see council tax bills soaring — up to £10,000 more per year. Property expert Kirstie Allsopp warned of a “cliff edge” just under £2 million that could lead to undervaluation battles with tax inspectors.
This blatantly breaks Labour’s 2024 manifesto pledge promising “no banding changes” to Council Tax. Pensioners may defer payments, but younger owners face the bill now. The move is expected to raise up to £2 billion when values are updated.
Pensions Hit with Another Raid
Echoing Gordon Brown’s infamous pension grab, Reeves capped National Insurance relief for salary sacrifice pension contributions at £2,000 annually. Workers previously enjoyed unlimited contributions and full relief.
Experts say a £40,000 earner could lose £20,000 in pension savings by retirement under this.
The Fairness in Savings Union warns it “erodes saver confidence” and could discourage pension contributions.
The Treasury expects to pocket £2 billion a year from the raid — another blow to middle-income savers. The 25% tax-free pension lump sum remains for now, offering little comfort.
Two-Child Benefit Cap Scrap Mixed Reaction
On the spending front, Reeves scrapped the Tory-era two-child benefit cap at a cost of up to £3.6 billion annually — set to lift up to half a million children out of poverty.
Combined with a 4% benefit rise from April 2026 and partial winter fuel payment restoration, welfare spending leaps £15 billion per year. This fulfills a Labour backbench demand but sparks criticism from those who say the cash should cut taxes for working families instead.
Broken Promises Timeline
- Oct 30, 2024: “No extension of the freeze” — CBI speech
- Oct 31, 2024: “No more taxes” — Times Radio
- Nov 25, 2024: “No more taxes or borrowing” — CBI
- Dec 3, 2024: “Never another budget like that” — Parliament
- Jun 12, 2025: “Wait for OBR forecast” — BBC interview
- Sept 29, 2025: “World has changed, must protect stability” — Radio 4
Early OBR Leak Adds To Pressure
Adding to Reeves’ woes, the Office for Budget Responsibility leaked its 197-page economic forecast 30 minutes before her Commons speech. The report slashed GDP growth forecasts for 2025 and 2026, and debt is rising faster than expected.
Shadow Business Secretary Andrew Griffith called the leak “shocking,” hinting it was timed to soften market fallout. Government bond yields dropped slightly after the leak.
Tory and Public Fury Mounts
Conservative leader Kemi Badenoch tore into the Budget as “tax rises dressed as necessity,” demanding spending cuts not tax hikes.
Shadow Chancellor Mel Stride slammed Reeves for “reneging on working people.” He warned the post-war record tax burden of 37.4% GDP by 2029 starkly contradicts Labour’s worker-friendly claims.
Public backlash exploded online under #ReevesRaid, with 20,000 tweets in hours. A YouGov poll showed Labour support plunging to 22%, while Nigel Farage’s Reform UK surged to 28%.
Reeves blames inherited Tory debt, Brexit fallout, and global instability. Still, voters are left wondering if Labour truly grasps the crunch on working families.
What’s Next?
- Corporation tax stuck at 25% to reassure businesses
- £1 monthly nuclear levy to fund Sizewell C power station
- High street business rate reforms promised
The Chancellor calls these “hard choices” to fix public services and restore economic balance. But with taxes rising, growth falling, and promises broken, Labour faces a tough fight to regain trust.
