Rachel Reeves pledges to tackle soaring living costs with tax hikes and major reforms

Chancellor Rachel Reeves has pledged to “grip the cost of living” in her forthcoming autumn budget, promising a bold package of tax increases and welfare changes to plug a projected £20 billion hole in the public finances. The announcement comes after she acknowledged that high inflation “hits ordinary families most” and warned that the economy “feels stuck” for too many people.

According to Reeves, she aims to help those struggling with day-to-day costs while making public finances more sustainable over the long term. Among the measures she is expected to introduce are a freeze on income-tax thresholds for two more years, adjustments to salary sacrifice schemes, and increased taxation on high-value properties.

Freezing income-tax thresholds until 2030 could bring more workers into higher tax bands as wages gradually rise, raising more revenue without increasing the headline rate of income tax. Reeves also plans to scale back tax breaks on salary sacrifice schemes, including pension contributions, which critics argue favour higher earners and employees in more secure jobs.

Another proposal under consideration is a surcharge on the most expensive properties, targeting those owning premium real estate as part of a broader move to raise wealth taxes. In addition, Reeves is said to be examining a pay-per-mile tax for electric vehicles, designed to compensate for lost petrol duty revenue as more drivers switch to greener transport.

Despite rejecting direct increases in income tax after her last budget raised employer National Insurance, Reeves’s new package has drawn criticism from both the left and right. The Green Party leader, Zack Polanski, and the Unite general secretary, Sharon Graham, have urged her to go further with a robust wealth tax, arguing that ordinary workers—and disabled people—are bearing the brunt of price rises while the richest avoid paying their share.

Polanski told the BBC that it was “outrageous” how long it had taken Labour to consider a wealth tax and insisted that the burden should fall on multimillionaires and billionaires, not on working people. Graham echoed this view, calling on Reeves to “be Labour” by introducing a meaningful levy on wealth and relaxing fiscal rules to enable more borrowing for public investment.

On the other side of the debate, the Conservative politician Kemi Badenoch accused Reeves of introducing a stealth tax through her freezing of thresholds. She said the chancellor should admit that the move breaks Labour’s manifesto promise not to raise taxes on working people. Former Tory chancellor Jeremy Hunt also warned that wealthy individuals may leave the country in response to higher taxation, pointing to reports that billionaires, including Lakshmi Mittal, have already reduced their UK commitments.

Reeves herself has framed the budget as a necessary course correction, arguing that growing inequality and cost pressures demand action. She intends her second budget to be a signal that her government is serious about both supporting struggling households and restoring fiscal health.

By targeting the wealthier with property levies and revising breaks on salary sacrifice, Reeves hopes to balance fairness with pragmatism. Her proposed adjustments to electric vehicle taxation reflect her ambition to future-proof revenue streams in a changing economy.

The chancellor’s agenda, however, remains politically fraught. She must navigate calls from her party’s left for more radical wealth redistribution while fending off accusations from the right that she is raising taxes on ordinary people by stealth. How she strikes that balance could define her leadership in the months ahead—and shape Labour’s economic reputation.

As the budget approaches, all eyes will be on whether Reeves’s promises translate into concrete policies that can truly ease the burden on households or whether they will deepen divisions within her own ranks.