Workers and pensioners 'set for £377 income tax rise' in Rachel Reeves plan

A manifesto breaking income tax rise could cost you as much as £377 a year.

According to financial experts at AJ Bell, strongly rumoured tax increases set to be unveiled in the Autumn Budget later this month could cost individuals an extra £377 a year for middle earners taking home £50,270.

Even if Income Tax was only increased by one percentage point from 20% to 21%, workers, savers and even pensioners will be paying between £24 and £377 more per year to HMRC for earnings ranging from £15,000 to £50,270.

The experts warned that tax increases on salary look 'increasingly likely', despite Labour's previous promise not to raise taxes for 'working people'.

AJ Bell's Director of Personal Finance Laura Suter said: "While [Rachel Reeves] batted away questions on what taxes would change and whether Labour would break their manifesto commitment to not raise VAT, income tax and National Insurance, that looks increasingly likely.

"But if she increased the basic rate of income tax, she'd be the first Chancellor in 50 years to do so."

She added: The simplest option would be to increase the basic rate of income tax by one percentage point, taking it from 20% up to 21%. The move would impact anyone who earns more than the tax-free Personal Allowance of £12,570 - but those who earn more would pay more.

"It would cost taxpayers up to £377 a year in extra tax, with anyone earning £50,270 or more facing the maximum hit. For someone on £15,000 a year the extra tax hit would be just £24 while someone on £35,000 would pay £224 a year more in tax. The move would impact anyone with a taxable income, not just those who are employed, as you pay income tax on earnings, pension income, rental income and interest on savings."

Ms Suter also explained why it's less likely that Labour will target higher earners - as it's not going to generate as much revenue.

She added: "A more dramatic option would be to add 1 percentage point onto all income tax rates, also taking the higher rate up to 41% and the additional rate to 46%. However, the latter doesn't raise that much more money for the Government. Increasing the basic rate of tax to 21% would generate £6.9 billion in the next tax year and £23.4 billion over the next three years, according to HMRC's own figures."

In an unusual speech just three weeks out from the major fiscal statement that is the Autumn Budget on November 26, the Chancellor on Tuesday would not commit to Labour's manifesto promises not to raise income tax, national insurance or VAT, fuelling speculation.

Plans to levy a 3p per mile tax on EV drivers have also been part of the package of hikes said to be on the table.

The Budget will focus on cutting NHS waiting lists, and addressing the cost-of-living crisis, the Chancellor said, as well as reducing the burden of interest on government debt.