3 policies most likely targeted in Autumn Budget costing workers £555 | Personal Finance | Finance

Though Chancellor Rachel Reeves has U-turned on plans to raise income tax in next weeks budget, she still have to make up the money to fill in the £50billion blackhole in government finances. Instead of income tax, she is targetting a “smorgasbord” of other money makers which could leave you £555 worse off by 2030.

There are several rumours about what will be up for the chop in the budget. Among them are cuts to the cash ISA allowance, a cap on salary sacrifice and a stealth tax by extending the current income tax thresholds, The Sun said. There is no way to know what will happen for sure until the budget is announced on November 26.

It is not known when these changes would be enacted, so these predictions are calculated in the two years up until 2030 as if they would come in by 2028.

The current income tax thresholds have been frozen since April 2021 by the then Conservative governement until 2028. Presently, you do not need to pay income tax on anything up to £12,570 a year.

Anything above this is subject to income tax. Workers earning between £12,571 to £50,270 a year are taxed at the basic rate of 20%. Those who earn between £50,271 to £125,140 are taxed at a higher rate of 40%. Those above £125,140 pay 45%.

The Chancellor is reportedly considering extending the threshold freeze a further two years until April 2030. This would raise more than £8billion, said The Sun. This is because millions would be pulled into a higher tax bracket, a concept called fiscal drag.

3.3 million people will start to play tax for the first time by 2030, according to Finder figures. Meanwhile four million people will be dragged into another tax bracket and 1.7 million will become additional rate taxpayers. Workers on £20,000 – £40,000 a year would need to hand over an extra £321 between 2028 and 2030, when the thresholds are unfrozen. Those earning between £50,000 – £100,000 a year would see their tax bill soar by £961.

Another measure to raise more money that Rachel Reeves could implement is a cut on cash ISA allowances. The allowance currently stands at £20,000 and there are reports that Reeves is thinking of slashing that to £12,000.

Cash ISAs currently allow you to put £20,000 of savings into either a stocks and shares ISA or a savings ISA. These accounts earn interest, which you win tax free. Cutting the allowance would, of course, cut the amount you earn tax free in the account.

She hopes that the measures will encourage investment into stocks and shares, The Sun said, but experts have criticised the move, saying it will discourage saving.

The change would hit those who currently use thier full yearly ISA allowance with an £80 tax bill a year, or £180 over the two years, assuming their savings account has an interest of 5%.

Salary sacrifice schemes are offered by employers, lowering employee’s salaries in return for putting the difference into their pension or giving out company benefits like a company car. Because the salary is technically smaller, it means employers pays less in National Inurance Contributions and that employees pay less income tax.

Currently there is no limit on how much you can pay into your pension via salary sacrifice, but the Chancellor is thinking of capping the amount of tax-free salary sacrifice you get a year to £2,000. This is in hopes to generate another £2 billion a year.

The change would see a worker on £40,000 a year handover an extra £74 in tax between 2028 and 2030 assuking they sacrifice 5% of their salary to pension contributions a year. Workers on £80,000 year would have an increase on their tax bill of £336, assuming the same salary sacrifice contributions.

Reeves is also said to be considering reforming the council tax system to tax wealthy homeowners more. This would be through introducing more tax bands.

Alcohol is another area that could be raided for tax. Drinkers were hit with a 3.6% rise in alcohol duties, adding 54p to the cost of a bottle of wine and 32p to a bottle of gin. This could be hiked again by 4.5%. Industry leaders have urged Reeves not to do this.

Motorists could also be forced to pay £100 to drive their vehicle if the current temporary 5p per litre fuel duty expires. It would cost households a huge £7.3billion by 2029. Electric cars are also considered to be being hit with a pay per mile charge of between 3p and 9p depending on their weight.

A Treasury spokesperson said: “We do not comment on tax speculation outside of fiscal events.”