Chancellor Rachel Reeves Faces Crucial Decision: Stealth Tax Hikes or Drastic Cuts in Upcoming “Emergency Budget”

Chancellor Rachel Reeves is walking a tightrope with the nation’s finances, and leading economists are warning she’s left with just two options: hike taxes again or swing the axe on public spending. Back in October 2024, Reeves rolled out a £40 billion tax rise in a budget that was supposed to kickstart growth—but instead, it’s left pensioners, farmers, and businesses reeling, and hasn’t stopped money from draining out of the UK.

That cushion of £10 billion she’d built into her plans? It’s all but gone now. Meanwhile, Labour’s poll ratings have taken a tumble. Now, with virtually no fiscal wiggle room left, the Chancellor is preparing to reveal her next steps in the Spring Forecast on Wednesday, March 26. It’s technically not a budget—but the Tories are already calling it an “emergency budget,” and Labour’s refusal to rule out more tax rises is only adding fuel to the fire, reported GB News.

Insiders say Reeves is leaning towards cuts over tax rises, likely spooked by furious farmers who blocked central London after the last round of inheritance tax changes. And let’s not forget Labour’s pledge before the election not to “raise taxes on working people.”

One expected move? Freezing income tax thresholds again. Technically not a tax rise, but it’s a sneaky way for the Government to rake in more from rising wages—what’s often dubbed a “stealth tax.” Reeves might extend the current freeze, introduced by Rishi Sunak during Covid, until 2030. If that happens, someone earning £50,000 could be paying nearly £3,750 more in tax by then. For those on £130,000, the extra tax bill could hit £11,115.

Inheritance tax could also tighten further. After the October budget included pensions and farms in calculations, industry experts believe Reeves may go further, even if it risks more backlash. Critics call it Britain’s “most hated tax,” though others defend it as a way to address inequality.

One potentially explosive move could involve scaling back or scrapping the state pension triple lock. With pensions due to rise 4.1% in April, the cost is eye-watering. Ending the triple lock would be deeply unpopular—but the Treasury is under pressure, and tweaks to the system, like a smoothing mechanism, are being floated.

Other possible measures include dragging more high earners into the 45% tax bracket by lowering the threshold from £125,140 to £100,000. That change alone could cost someone on £110,000 an extra £2,250 a year.

Cash ISAs are also under review. Reeves has been listening to proposals to slash the annual allowance from £20,000 to £4,000, though nothing will happen before April 2026 at the earliest. With so many moving parts, all eyes are on Reeves next week—because something’s got to give.