Experts warn Chancellor only bold tax hikes can fix UK finances as property industry continues to push back against proposed levies
Chancellor Rachel Reeves has been advised by leading tax and economic experts that significant tax increases and reforms are necessary in the forthcoming Budget to address the UK’s strained public finances. However, calls to shield the property market from further taxation have intensified, with industry groups and homeowners warning against measures that could affect housing.
With a reported deficit of up to £50 billion, the chancellor is expected to announce tax rises next month. Experts have cautioned that small, piecemeal increases will not be sufficient to restore economic stability.
Dan Neidle, founder of Tax Policy Associates, stated that the most effective approach would be “raising one of the main taxes, possibly by expanding the base of VAT, which may or may not break a manifesto pledge”. He said in an article published by The Independent: “The less wise way to do it is by picking from a Scrabble bag of lots of little tax rises.”
Economists have warned that a combination of policy reversals, increased government borrowing, and slow economic growth leaves the chancellor with little alternative but to raise taxes or reconsider Labour’s fiscal rules. The situation has been further complicated by the Budget watchdog’s recent downgrade of a key economic indicator, potentially increasing the pressure for tax hikes.
Neidle also recommended changes to the tax system to support growth, describing the current situation as “quite desperate” during his evidence to the Commons Treasury committee. He highlighted the £90,000 VAT threshold for small businesses, noting that it discourages expansion due to the immediate tax implications of exceeding the limit.
Ruth Curtice, from the Resolution Foundation, also told MPs: “Looking at things in the round, [Reeves] should raise taxes at this Budget. When you look at the cost of borrowing for the UK relative to other countries, it’s one of the highest of rich countries, [so] there is a strong case for raising taxes at this budget.”
Despite these calls for broad tax increases, the property sector has urged the chancellor to leave the housing market untouched. The Intermediary Mortgage Lenders Association (IMLA) has recently cautioned that targeting the housing sector for tax increases would have limited fiscal impact and could impede economic recovery.
Homeowners have also voiced significant concern about potential changes to Stamp Duty Land Tax (SDLT) and the proposed extension of capital gains tax (CGT) to main residences, arguing that such measures could undermine confidence and activity in the market.
The National Institute of Economic and Social Research (NIESR) has recommended that the chancellor focus on raising income tax in the Budget, contending that other options under consideration—including wealth levies and corporate surcharges—would introduce greater distortions into the economy. The NIESR, however, pointed out that among the various “undesirable or infeasible” choices, a moderate rise in income tax would cause the least disruption.
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