Rachel Reeves is reportedly contemplating a 2p increase in income tax, a move that would breach Labour's manifesto commitment that the party would not raise income tax, National Insurance, or VAT. Sources say that the Chancellor is considering cutting National Insurance by 2p and raising income tax by 2p. The move, which has been proposed by the Resolution Foundation think-tank, would raise £6bn for the Treasury as Ms Reeves looks to plug a gap in the public finances. The plan put forward by the think-tank would see the basic income tax rate rise from 20% to 22%, with the higher rate climbing from 40% to 42% and the additional rate going up from 45% to 47%. At the same time, the National Insurance rate would drop from 8% to 6% for basic rate income tax payers, and from 2% to zero for higher and additional rate payers.
