Workers set for income tax hike as Rachel Reeves ‘to extend freeze on thresholds’

Conservatives have accused Keir Starmer and Rachel Reeves of preparing to break a manifesto pledge

Keir Starmer and Rachel Reeves have been accused of preparing to break a manifesto pledge with reported plans that could see hundreds of thousands more people dragged into paying higher rates of tax.

The row centres on income tax thresholds, which have been frozen since 2021.

While they remain fixed, inflation on wages pushes more workers into paying higher rates of the levy.

The freeze had been due to end in 2028, but Ms Reeves is thought to be preparing to extend it in the Budget announced at the end of the month, as part of her drive to raise £40bn and plug a hole in the public finances.

Sir Keir Starmer and Rachel Reeves look to fill a £22bn “black hole” in public spending announced in late July (AFP via Getty Images)

The prime minister did not deny the measure when he was asked about the issue while on a trip to Berlin.

But he insisted he was not planning to break his promises to the public, which included not raising taxes on working people. Earlier this week, he refused to rule out increasing employers’ national insurance contributions.

“We are going to keep our manifesto pledges,” Mr Starmer told a press conference.

But a Tory source told The Independent: "Any increases in tax on working people would break Labour’s manifesto. We had been clear that we would end the threshold freeze.”

Last year Ms Reeves suggested she would end the freeze in thresholds .

She said at the time: “It does concern me that people on average earnings are paying more in tax because they are dragged into higher tax brackets. That is a sign of failure. The government is picking the pockets of working people.”

Tory leadership contender Robert Jenrick said: “Another day, another broken manifesto commitment. Labour now want to hike taxes on working people’s incomes too. You can’t trust a word Starmer says.”

The Treasury has refused to comment on the claims, which were first reported in the Financial Times. A Treasury spokesperson said: “We do not comment on speculation around tax changes outside of fiscal events.”