While this could still be subject to change, this makes it seem more likely that an income tax increase is on the way.
In a move projected to raise more than £6 billion a year to plug the financial black hole facing the UK, the Chancellor is expected to announce a 2p rise in income tax.
That will be set alongside a 2p cut in national insurance, in an attempt to reduce the impact for workers.
However, it won’t protect everyone. Here’s a closer look at how much you can expect to see your income tax change by. Remember that these plans aren’t confirmed yet and these estimations may change depending on your unique circumstances.
Who will be most affected by the proposed income tax hike?
With Reeves’ move to use a 2p national insurance decrease to offset the effects of the income tax hike, that still leaves pensioners, who don’t pay national insurance, at a loss overall.
For pensioners with an income of £35,000 a year, they would pay an estimated £448.60 extra in tax per year, while pensioners with an income of £65,000 would need to pay a whopping £1,048.60 more per year, according to estimations from AJ Bell.
The self-employed could also see some dramatic changes in income tax if Reeves chooses to make self-employed and employed national insurance contributions equal, another idea reportedly being floated.
How much will income tax rise for me?
For permanent salaried workers, Reeves has reportedly said that “those with the broadest shoulders” should bear the brunt of the income tax increase.
The average worker earning £35,000 (the median in the UK) would see no change in their overall tax position, despite potentially seeing your income tax rate increase by 2p on your pay slip.
This is because the income tax and national insurance changes would effectively cancel each other out.
Indeed, even those who are employed earning above £55,000 would not see a change in their income tax according to AJ Bell’s calculations.
The situation changes slightly for additional rate payers –those earning over £125,140 – who would see a £250 decrease on their take-home pay.
That’s because they’d lose some of the benefit of the first £12,570 of their earnings being national insurance free, whihc is an allowance that is currently removed for their income tax charge.