Reeves mulls raising top tax rate to fill Budget black hole

Chancellor under pressure to break the manifesto pledge not to increase income tax as she tries to find £30bn-£40bn

- DAVID MADDOX, CAITLIN DOHERTY

Rachel Reeves is under pressure to break Labour's manifesto pledge with a tax raid on the highest earners amid growing calls from within Labour to hit the wealthy.

Ministerial sources have told The Independent that changes to the top rate of income tax have been discussed within government as the chancellor looks to find ways to fill a Budget black hole estimated to be between £30bn and £40bn.

The changes would exceed the 1p increase to income tax that Ms Reeves is also understood to be considering.

One source said: “The 45p rate is definitely in play. It would be a popular move within the party.”

The 45p rate is applied at a rate of 45 per cent on income above £125,140, and is expected to be paid by more than 1.2 million people by the end of the year.

The move would break the manifesto pledge to not increase income tax, VAT or employee contributions on national insurance.

However, another source said: “Rachel is in a fix. If we are going to break this manifesto pledge but it was targeted at the highest earners, then I think that would be understandable.” Speculation that the government is ready to drop its manifesto pledge was heightened earlier this month when the PM's spokesperson hinted that the manifesto pledge on not raising income tax may not hold.

When asked if income tax, VAT or national insurance could rise in the Budget, the spokesperson said: "I'm not going to speculate on the Budget but as the chancellor said today, the numbers will always add up."

However, after claims in The Guardian that the manifesto pledge could be broken generally, Cabinet Office minister Nick Thomas-Symonds insisted on Friday that the promise still stands.