HMRC

THE chancellor could raise tens of billions from tax reforms that don’t hit “working people”, leading economists have said.

Rachel Reeves is under pressure to fill an estimated £50billion black hole in the public finances ahead of November’s autumn statement. 

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Westminster is awash with rumours that Labour could extend the freeze on income tax thresholds.

However, critics say this would mean breaking Labour’s manifesto pledge not to increase taxes on “working people”.

But in a new report, the Institute for Fiscal Studies (IFS) urged the Chancellor to resist “half-baked” solutions like “simply hiking rates”. 

The IFS Green Budget Chapter report instead urges the chancellor to reform the “unfair” and “inefficient” tax system.

End capital gains tax relief on death

Reeves could scrap capital gains tax relief on death, the report said.

When you sell certain assets – like houses, land or other valuable items – you have to pay a tax on the profit you made on it.

However, there are some important exceptions.

For example, if someone dies and you inherit their asset, you don’t have to pay capital gains tax they would have paid.

But the IFS said Reeves should consider scrapping the relief, raising £2.3billion in 2029-30.

However, families could oppose the measure given Labour is already skimming more revenue off inherited wealth.

The inheritance tax threshold has been frozen at £325,000 since 2009.

And last year, Reeves announced she would extend the freeze until 2030.

Hit taxpayers with a ‘one-off’ wealth tax

Economists and politicians are often divided over whether a wealth tax would work.

Supporters argue that the UK’s richest 1% are wealthier than the bottom 70% – and that a wealth tax would reduce this inequality.

But critics say it would be an administrative nightmare and lead millionaires to leave the country, taking their businesses and tax revenues with them.

But if Labour does reach for wealth in the budget – it should opt for a “one-off” wealth tax, the IFS said.

The think tank argues this is a better option than a recurring wealth tax.

It would work by the government calculating how much people’s total assets are worth and taxing them over a certain threshold.

“An unexpected and credibly one-off assessment of existing wealth could in principle be an economically efficient way to raise revenue,” the IFS wrote.

However, a wealth tax that happened on a regular basis would have “serious drawbacks,” the think tank warned.

Valuing everyone’s wealth every year would be “extremely difficult,” it said.

Moreover, a regular tax could deter the highest tax payers from residing in the UK long-term, potentially hitting overall tax revenues.

But the IFS said that even a “one-off” levy could spell trouble if people don’t trust the government not to come back for more.

The report said: “The potential efficiency of such a tax could be
undermined, however, if announcing a one-off tax created expectations of, or uncertainty about, other future taxes.”

Double the council tax rates paid by highest value homes

A new council tax surcharge could raise up to £4.4billion.

Council tax is a local tax on residential properties in the UK, with homes assigned to Bands A to H based on their value.

Bands G and H generally include the highest value homes.

The IFS said doubling the council tax paid by these households could mean a £4.4billion boost.

However, critics already say the council tax system is “unfair and arbitrary”.

As reported by The Sun, families living in modest homes sometimes pay more than those in multi-million-pound mansions.

The root of the problem is simple – council tax bills are not based on what your home is worth today.

Instead, it’s based on its value way back in 1991, when homes were categorised into bands ranging from A to H. 

Decades of uneven house price growth mean this once-simple system is now riddled with inequalities.

Moreover, councils set their own tax rates – leading to a “postcode lottery”.

The average Band D council tax in England is £2,280, but councils set their own rates.

For example, in Wandsworth, people pay just £990, while in Nottingham, they pay £2,656.

This means that millions of homeowners pay much less compared to their property’s value than those in poorer areas, according to PropertyData.

Another potential problem is that the extra cash would go to local authorities rather than central government.

Local authorities use council tax to pay for local services like schools, bin collections and libraries.

So to make sure it reaps the benefits of the change, Downing Street could reduce the grants being paid to councils, the IFS said.

The UK government gives councils more than £69billion in funding – a 6.8% increase in cash terms compared to 2024-25.

But councils would likely still fight back against any funding downgrade – with sticky 3.8% inflation already eating into their grants.

Rejig inheritance tax

The IFS admits that changes to inheritance tax could ‘provoke’ strong reactions.

But its report said that the £9billion said annually is ‘modest’ – although high by historical standards.

Reforming death duties to abolish the additional £175,000 tax-free allowance could raise around £6billion, the economists wrote.

“One obvious option would be to increase the rate of inheritance tax from its current 40%,” the economists wrote.

They said an increase of just 1% would raise £0.3billion in 2029–30.

The government could also reduce the threshold at which the tax begins to be paid.

Currently, people can pass on up to £325,000 of wealth tax-free.

Then there’s an additional £175,000 tax-free allowance that can be used only when passing on a primary residence to a direct descendant.

Abolishing the second of these allowances, for example, could raise around £6billion in 2029–30, the IFS said.

Crack down on businesses underpaying their taxes

The think tank has urged Labour to tackle tax non-compliance.

Corporation tax, a tax on company profits, has become increasingly important to the Treasury’s coffers in recent years.

Over the course of the 2010s, revenue averaged 2.4% of national income, rising to 3.3% in 2025–26.

But corporation tax dodging meant 15.8% of liabilities went unpaid in 2023-24, up from just 8.8% in 2017-18.

Small businesses are mainly to blame, the IFS said, admitting that claiming the prize of missing corporation tax “would not be straightforward in practice”.

The think tank added: “More work is needed to understand why so many small companies are submitting incorrect tax returns.

“It is likely that tackling the gap would require targeted
compliance activities from HMRC, such as auditing small businesses.”

The IFS also said “more revenue could be raised from corporation tax”.

However, it did warn that, while a 1% increase would raise £4.1billion, there could be adverse consequences.

The authors wrote that investment in the UK could become “less attractive” and reduce future tax yields.

However, critics may argue that any tax hike hitting members of the public – even if targeting inheritance or council tax – will still feel like a broken promise.

What must the chancellor avoid doing?

The personal tax allowance has been frozen at £12,570 since April 2021.

Prime Minister Rishi Sunak announced the freeze would remain until April 2026 and Labour extended it until April 2028.

Extending the freeze on personal tax thresholds including national insurance contributions would raise around £10.4billion a year from 2029-30.

But IFS economists say Reeves must not do this – and instead lift the threshold amid rising inflation.

Extending the freeze would be a breach of Labour’s manifesto pledge not to increase taxes for “working people” which includes income tax, national insurance and VAT, the IFS said.

The report’s authors also said restricting income tax relief on pension contributions would raise large sums but should be avoided.

Currently, when you put money into a pension, the income tax you’ve already paid on that money is essentially returned via a government top-up.

The IFS said restricting relief would be “unfair” to penalise pensions again when pension income is already taxed.

The Chancellor should also resist the temptation to up stamp duties, the IFS said.

The think tank fears it would cause people to avoid selling their homes when they want to – hitting the jobs market and holding back growth.

“Changing rates and thresholds is all very well, but unless the Chancellor is willing to pursue genuine reform it will be taxpayers that shoulder the cost of her neglect,” the report, which forms a chapter in the IFS’s wider budget assessment for 2025, said.

Isaac Delestre, a senior research economist at the think tank and an author of the chapter, said Ms Reeves would have “fallen short” if she reaches for quick revenue without wider reform.

“Almost any package of tax rises is likely to weigh on growth, but by tackling some of the inefficiency and unfairness in our existing tax system, the Chancellor could limit the economic damage,” he said.

EX-FOOTIE star and manager Iain Dowie faces being made bankrupt after being taken to court by the taxman.

Cult hero Dowie, 60 – who coined the term “bouncebackability” – has been hit with the bankruptcy petition by HMRC with a hearing due at the High Court.

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It comes almost two decades after ex-Luton, Southampton and West Ham striker Dowie was clobbered with a huge legal bill after leaving Crystal Palace as manager.

A court ruled in 2007 that Dowie deceived Palace into waiving a £1 million compensation clause when he quit.

And a source said: “It looks like Iain’s financial problems might date back to that legal action – there doesn’t seem to be any other reason for it.

“It is a shame for him as he’s such a likeable bloke, but he hasn’t cashed in with punditry as much as some other ex-players and he probably could have done.

“But Iain is a bright bloke and I am sure he will bounce back.”

After leaving Palace, Dowie joined Charlton – but left the Addicks after just 15 games.

His contract contained a clause that Palace would receive £1 million in compensation if Dowie left to join another club.

The 59-cap Northern Ireland international worked as a sales manager and a Sky Sports pundit since his football career ended.

In 2023, Dowie told how he had landed a new position – as a mortgage advisor at a law firm.

He joined Alexander Grace Law, based near Burnley, as a business director leading its re-mortgaging team.

Dad of two Dowie, whose wife Debbie was also working for the company, said: “While people may wonder how I’ve gone from the football pitch to the office I have been working within the conveyancing arena for some four years now and when I was asked if I would come on board with them it was a no-brainer.”

Last year Dowie – who scored 105 goals in 388 league games – said he was lucky to be alive after suffering cardiac arrest during a spin class at a gym in Chorley, Lancs.

After he was treated by other gym-goers and paramedics, Dowie backed calls for more people to learn CPR and said he survived due to the “brilliance of everyone involved”.

Dowie famously used the word “boucebackability” to describe a Crystal Palace comeback and it entered the Oxford dictionary in 2005.

A spokesperson for the star did not respond to a request for comment.

MILLIONS of pensioners will be hit with £300 tax bills from HMRC this winter.

From November, around nine million pensioners will begin to see up to £300 land in their bank accounts.

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The cash boost comes as part of the Winter Fuel Payment, which is a benefit issued by the DWP to help elderly people with fuel costs over the colder months.

It comes after a previous £300 payment was axed for millions of pensioners last winter and only those on certain benefits qualified.

The move triggered a massive backlash for Labour as some 10million pensioners lost their winter fuel allowance in the benefit cut.

It saved the Treasury just £1.4billion but caused a massive public outcry.

The government later cracked under pressure and was forced to perform a half baked U-turn.

Most pensioners are now eligible for the support, which is worth between £100 and £300.

However, if your income is more than £35,000, HMRC will take the money back.

Your income can come from a range of factors including your private pension and state benefits.

If you fall into this earnings category, you can opt out of payments.

But the deadline to do so ended on September 15.

What happens now?

If you did not opt out, HMRC will change your tax code and you will receive a tax code notice letter.

Changing your tax code means that your Winter Fuel Payment will be deducted from your income and paid to HMRC in monthly instalments.

So for example, if you received a £100 Winter Fuel Payment but had an income of £35,000, you will pay back around £9 every month.

You will be charged from April 2026, which is the start of the new tax year.

Households can check if they are over the income thresholds by visiting www.tax.service.gov.uk/guidance/check-if-hmrc-will-take-back-your-winter-payment/start/country.

How to opt out of future charges

The deadline for opting out of the Winter Fuel Payment for 2025 to 2026 has passed. 

But you can opt out of getting the benefit for 2026 to 2027 from April 2026.

When it reopens, you will need to complete either an online form or phone the helpline on 0800 731 0160.

If you opt to complete the form online, you will need details such as your National Insurance number.

Who is not eligible for the payment?

You can get a Winter Fuel Payment if you were born before September 22 1959 and live in England or Wales.

But a small group of individuals will not be eligible, including:

• live outside England and Wales
• were in hospital getting free treatment for the whole of the week of 15 to 21 September 2025 and the year before that
• need permission to enter the UK and your granted leave says that you cannot claim public funds
• were in prison for the whole of the week of 15 to 21 September 2025

Most people are paid the benefit automatically but if you think you are risk of missing out you can apply.

MILLIONS of Brits who rely solely on the state pension face having to pay income tax within the next two years.

Rises guaranteed under the triple-lock will push many dangerously close to the £12,570 tax threshold.

State pensions rise each year by the rate of either inflation, earnings growth, or 2.5 per cent — whichever is highest.

With wage growth at 4.7 per cent, the full new state pension will rise to £12,535 a year next April.

That is £35 short of the frozen income tax threshold, meaning OAPs in question are certain to be paying up by 2027.

Despite warnings, the Government has made no commitment to raising tax thresholds or making an exemption for Brits who have only the state pension.

A spokesman said: “We are committed to helping pensioners live their lives with dignity and respect, which is why millions will see their pension rise by up to £1,900 this Parliament.”

They also stated that people completely reliant on the state pension would not have to pay any income tax “this year”.

HMRC is expected to deduct tax directly through pension providers — or send pensioners a Simple Assessment tax bill that they have to work out.

Campaigners last night blasted the news, with ex-Pensions Minister Sir Steve Webb calling it a “creeping injustice” due to “drag millions more into the tax net”.

Rachel Vahey, of pensions firm AJ Bell, said it would force many older Brits to fill out their first self-assessment, and warned that present financial woes made reforms on taxes and pensions unlikely.

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HUNDREDS of thousands of Brits could be hit by a surprise £500 tax bill as a new rule comes into effect. 

The new scheme could affect nearly 900,000 business owners across the UK. 

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The Government’s new Making Tax Digital scheme will require people over a certain income threshold to keep electronic records and file updates every financial quarter.

The move is part of the Government’s efforts to crack down on tax fraud, which cost Britain £12.4 billion from 2021 to 2022.

However, financial advisors have warned that the cost of reporting your tax figures could cost up to £500 a year once staff training, software and admin time are factored in – according to George Holmes, managing director of Aurora Capital. 

Only people who earn £50,000 from self-employment or from rental properties will be subject to the new rules.

Ahead of the change, Craig Ogilvie, director of Making Tax Digital at HMRC, said: “With April 2026 on the horizon, we are issuing letters to customers we believe will be mandated, outlining specific requirements and timelines.”

He added: “We urge those who meet the mandate criteria to join our testing programme on GOV.UK now to help shape the final service and make your transition smoother.”

An estimated 864,000 sole traders and landlords will need to comply with the new rules.

James Murray MP, Exchequer Secretary to the Treasury, said: “MTD for Income Tax is an essential part of our plan to transform the UK’s tax system into one that supports economic growth.”

Murray added: “By modernising how people manage their tax, we’re helping businesses work more efficiently and productively while ensuring everyone pays their fair share.”

The news comes after experts warned Rachel Reeves that she would have to find £50 billion to plug a black hole in Britain’s finances. 

The Chancellor has remained committed to her fiscal rules, which requires the UK to have financial cushion of £9.9billion by the end of the decade.

In order to put the UK’s finances on a firm footing, experts from the National Institute of Economic and Social Research have said that Ms Reeves will have to raise taxes.

Prof Stephen Millard, from the institute, said: “We would advocate building a bigger buffer. 

“To do that requires moderate but sustained increases in taxes.”

The think tank also upped its growth forecast for this year to 1.3 per cent but knocked their prediction for 2026 down to 1.2 per cent from 1.5 per cent.

Meanwhile, tax refund letters have started landing on doorsteps across the UK but Brits have been warned to watch out for scams.

A Freedom of Information (FOI) request by The Sun found that HMRC refunded a staggering £8.3billion in overpaid tax from 2022 until 2023 — with the average worker pocketing £943.

However, any letter or email which requires you to give your credit card details, transfer money or click a link should be avoided at all costs. 

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