UK Finance Minister Signals Personal Income Tax Rise

UK Finance Minister Rachel Reeves signaled a plan to raise personal income tax rates in the budget to be presented on 26 November 2025. The announcement was made in London as the government seeks to close a widening fiscal deficit.

Reeves said the budget gap exceeds £30 billion (about Rp618 trillion) and proposed adding a two‑pence (2 p) increase to the basic rate and a five‑pence (5 p) rise for the 40 % tax band on high earners. The proposal has been submitted to the Office for Budget Responsibility (OBR), the UK’s fiscal watchdog, and is paired with a two‑pence cut to National Insurance contributions for earnings below £50 270.

If approved, the measures could generate over £20 billion in additional revenue annually but may shave roughly one percentage point off next‑year growth. Economists at the National Institute of Economic and Social Research (NIESR) consider the personal income tax hike the most effective option compared with raising VAT or corporation tax.