Tax changes could impact workers' finances significantly

Chancellor Rachel Reeves has promised not to raise taxes on "working people." However, some believe she may find ways to increase taxes without directly breaking this commitment. Last October, she increased employer National Insurance, which many argue is a hidden tax. This change could lead to job losses, as businesses often pass costs onto employees through lower wages or higher prices. Despite claiming she kept her promise, the economic impact has been significant. Reeves will deliver her Spring Statement on March 26. So far, she has backed away from plans to cut the annual Cash ISA allowance from £20,000 to £4,000. While this is good news for savers, experts warn there could be future tax increases. Financial and tax experts suggest Reeves might employ four strategies to generate revenue without breaking her word. First, she might increase penalties for late self-assessment tax returns. Currently, there's a £100 fine that hasn’t changed in decades. Raising it to £500 or £1,000 could generate significant income, especially since many people miss the deadline. Second, she could reduce tax relief on pension contributions to a flat rate. This would hurt higher earners while possibly benefiting basic-rate taxpayers. Third, she might tax company pensions by extending National Insurance charges to employer contributions. While this wouldn’t hit employees directly, it could lead to lower salaries or reduced hiring. Finally, she might extend VAT to private medical and dental care. This would affect people who rely on private services due to issues with the NHS. While these potential tax increases could be controversial, experts suggest Reeves may see no other option given the country's financial struggles. Even if she avoids tax hikes now, future increases may be imminent.