Labour has wrecked the economy… here's how YOU might be made to pay – from fuel duty to income tax

Scottish Sun

2 days ago

Find out which tax hikes could be coming — and how likely they are on a scale of 1 to 5
RYAN SABEY Labour has wrecked the economy… here's how YOU might be made to pay – from fuel duty to income tax
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IF Rachel Reeves was heading into Parliament's summer break with a huge headache, things just got a whole lot worse.
The Chancellor woke up yesterday to a storm around Government borrowing hitting £20.7billion last month.
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With soaring debt and past decisions hitting growth, Rachel Reeves is said to be preparing for a tough Budget and likely tax rises
Credit: The Mega Agency
The figure — higher than the £17.1billion forecast for the period — was fuelled by a rise in the interest charges on ­government debt.
And now, instead of blue skies and sunshine over the summer, Ms Reeves will have to deal with dark clouds ­gathering over the Treasury.
She has said that 'the world has changed' since her previous Budget, with Donald Trump's global tariffs creating uncertainty.
But the harsh reality is that a series of decisions this ­Government made has wrecked what was always going to be a fragile recovery.
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The decision to increase NI contributions for employers had a ­devastating impact on expansion and hiring plans — and wrecked confidence.
Anger was also levelled at her and Sir Keir Starmer for talking the country down when Labour first came to power, as they painted a gloomy economic outlook for Britain.
This is all before businesses face the roll-out of the workers' rights package over the next two years, which will hit firms for £5billion, according to the ­Government's own impact assessment.
And better prospects for working people appear doomed as wealth ­creators flee the country due to the high-tax environment, with around 16,500 expected to leave this year.
Self-inflicted ­misery
And this self-inflicted ­misery could be compounded further in the Budget this autumn as Ms Reeves tries to solve her spending shortfall.
The financial black hole has only been made worse by this month's £5billion welfare reform U-turn and the £1.5billion she will now have to find after the partial retreat on Winter Fuel payments.
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Economists have already said that the Chancellor may have to fund a £30billion shortfall to meet her fiscal rules, and higher taxes are a near-certainty because Whitehall departments have already faced brutal cuts.
Ms Reeves insisted yesterday that UK productivity was the problem. She said low ­investment levels compared to other G7 countries had led to UK output not keeping pace with our competitors.
Reeves said it would be easy to cut capital spending, but these would be 'short-sighted, wrong decisions'.
Here, we weigh up the Chancellor's options as she battles to balance the books, along with our likelihood ­rating of the moves being adopted later this year.
1. Wealth tax
REEVES will fend off pressure from Labour MPs to bring in a wealth tax after being warned the well-off will flee the country.
The Chancellor is set to reject calls for levies on property, investments and savings after Lord Kinnock called for a two per cent surcharge on assets worth more than £10million.
But a host of other countries have already tried wealth taxes and they haven't raised the money needed to cover the public finances.
Recent research shows that the UK has seen 18 billionaires quit these shores in the past two years alone.
1/5
2. Income tax threshold freeze
IN one of the positives from last autumn's Budget, the Chancellor said there would be 'no extension' of the freeze in income tax and National Insurance thresholds.
She said such a move would hurt working people and take more money from their payslips.
But a freeze on income tax thresholds for the next two years would help ­Ministers raise around £8billion to fill the Budget black hole.
The move would mean that even more people would be brought into the higher rate of tax, with the freeze due to come to an end in 2028.
4/5
3. Fuel duty on petrol & diesel
5
Keeping the duty frozen and maintaining the 5p cut brought in back in 2022 will cost around £5billion a year
Credit: Alamy
COST-of-living demands on households will pile the pressure on to freeze fuel duty at its current level for another year, rather than opting for a much-needed cut.
Keeping the duty frozen and maintaining the 5p cut brought in back in 2022 will cost around £5billion a year.
The Sun's successful Keep It Down campaign has saved motorists around £100billion since our battle with the ­Treasury started in 2011.
The headline tax rate on petrol and diesel is ­currently 52.95p per litre.
Back in October, Reeves said raising fuel duty would be the 'wrong choice for working people'.
2/5
4. Capital Gains Tax
PROFITS made from sales on shares, investments and property could fall into play for raising funds for Treasury coffers.
Reeves raised the top rate of CGT by four per cent at the last Budget, but experts say if it goes up again the move could backfire.
Higher rate taxpayers pay 24 per cent CGT on the profits from sales, which contrasts with 40 per cent if it was earned income.
Nimesh Shah, from accountancy firm Blick Rothenberg, said: 'People may choose to hold on to things like houses so as not to crystallise the tax bill — or they may simply leave the UK and crystallise the gains abroad.'
2/5
5. Tourist tax on hotel rooms
5
Deputy Prime Minister Angela Rayner is pushing for councils to have new powers to tax tourists, but there are worries this could hurt already struggling hospitality businesses
Credit: AP
DEPUTY Prime Minister Angela Rayner is pushing for councils to be given new powers to bring in a tax on tourists.
The Labour number two is facing opposition from Reeves to bring in a ­surcharge similar to those other countries impose on hotel rooms.
But the Treasury is understood to be concerned that it would just hit struggling hospitality businesses that have already been badly bruised by the National Insurance raid.
4/5
6. Income tax, VAT and NI pledge
LABOUR promised at the last election to protect 'working people' from tax hikes, but uncertainty has arisen about who could be protected.
A key pledge was not to hike the main revenue raisers of income tax, VAT or National Insurance when the party came to power.
Treasury minister ­Darren Jones has insisted anyone who gets a payslip is a 'working person'.
It comes after Cabinet colleague Heidi Alexander said those on 'modest incomes' would be p­rotected.
1/5
7. Small business taxes
5
Craig Beaumont of the Federation Of Small Businesses says the Labour Government must prove it supports 'the country's everyday entrepreneurs'
Credit: Alamy
A MILLION bosses who own small businesses and set up as limited company directors fear being ­clobbered on their pay.
The business community worry the first £500 of dividend income being tax free could be hit in the autumn ­Budget.
Craig Beaumont, of the Federation Of Small ­Businesses, said: 'The ­Labour Government must show if it stands behind the country's everyday entrepreneurs'.
2/5
8. Pensions tax relief raid
5
Future pensioners could face cuts to tax relief on pension contributions, with a drop from 40 per cent to 20 per cent for high-rate taxpayers raising around £15 billion
Credit: Getty
FUTURE pensioners could see the tax relief on ­pension contributions lowered to help raise funds.
Higher-rate taxpayers get 40 per cent tax relief and basic-rate taxpayers get a lower 20 per cent rate.
If the rate was brought down to 20 per cent it could mean around £15billion would be raised.
The idea appeared to be rejected last year.
But it could be back on the table as autumn approaches to bring in necessary ­funding.
4/5