London, November 28, 2025
Rachel Reeves’s tax policies are set to increase tax burdens across the UK by extending freezes on income tax and National Insurance thresholds until 2031, along with introducing targeted new taxes on property, pensions, betting, and vehicles. The measures aim to fund public services without raising headline tax rates.
Fiscal Drag and Tax Threshold Freezes
The cornerstone of the increase in taxation under Chancellor Rachel Reeves’s financial strategy is the prolonged freeze of income tax and National Insurance thresholds until 2031. By keeping these thresholds static, wage increases that keep pace with inflation are pushed into higher tax brackets, a process known as fiscal drag. This silent tax rise affects millions of workers and pensioners, effectively increasing their tax liabilities without an explicit rise in tax rates.
Specific Tax Measures Driving Revenue
In addition to the threshold freezes, several smaller taxes contribute to the overall rise in tax revenue. A new property tax targets homes valued over £2 million, often referred to as the “mansion tax.” Pension contributions through salary sacrifice schemes face a £2,000 annual cap above which National Insurance applies, generating significant revenue. The government has also increased duties on online betting and introduced new taxes on electric and hybrid vehicles. Together, these measures broaden the tax base without changing headline income tax rates.
Broader Fiscal Policy Context
These tax increases form part of a £26 billion tax rise package scheduled for 2029-30. The government’s objective is to close the fiscal gap while avoiding a return to austerity or heavy borrowing. According to Reeves, these policies are designed to ensure sustainable funding for public services by expanding revenue sources discreetly and efficiently.
Expert Analysis on Tax Strategy
Economic experts such as Faisal Islam emphasize that the government’s approach avoids raising headline income tax rates directly. Instead, by freezing thresholds and implementing targeted smaller taxes, the government broadens tax liabilities, effectively increasing revenue while ostensibly keeping headline rates unchanged. This approach means a larger share of taxpayers face heavier effective tax burdens as inflation pushes incomes into higher bands.
The interplay of threshold freezes with additional levies embodies a cautious fiscal strategy aimed at balancing social funding needs with political and economic sensitivities. As these policies unfold, their true impact on household finances and economic behavior will shape ongoing debates over tax fairness and economic growth.