Rachel Reeves’s Budget Advisor Proposes Sweeping Tax Hikes: What Could Hit Households Next

Published: 28 August 2025 | The English Chronicle Desk

Chancellor Rachel Reeves faces the daunting task of raising between £20 billion and £50 billion in her upcoming autumn Budget, a challenge that has prompted her to delegate much of the planning to Pensions Minister Torsten Bell. Bell, the former chief of the Resolution Foundation, is widely recognised for his aggressive approach to taxation, advocating comprehensive levies across pensions, savings, property, and other areas of personal and business finance. Among his more controversial proposals is the scrapping of the state pension triple lock, a move that would directly impact retirees.

Torsten Bell’s influence was evident in last year’s Budget, particularly in the tightening of inheritance tax rules for family farms and businesses. Now, an audit of his fiscal wish list by political analysts and media outlets paints a daunting picture: if implemented, even a fraction of his proposals could significantly affect millions of households across the UK.

Several measures stand out for their potential impact. Bell proposes capping tax-free ISAs at £100,000, a move that would penalise disciplined savers and potentially disrupt retirement planning. The elimination of the £325,000 inheritance tax nil-rate band could bring almost all but the poorest estates into the 40% inheritance tax bracket. Homeowners could face substantial council tax increases, particularly for band E through H properties, affecting family homes in London, the South East, and hitting pensioners hardest.

Another highly contentious proposal involves the removal of the main residence relief, accompanied by the imposition of a 28% capital gains tax on property sales. Such a measure would affect house prices, reduce market mobility, and effectively make homeowners feel poorer. Additionally, Bell suggests abolishing the Lifetime ISA, thereby removing up to £1,000 a year in government bonuses intended to assist first-time buyers.

Investors and small business owners could also face a series of new burdens. Bell advocates raising capital gains tax (CGT) to 37% on shares and 53% on second homes, charging CGT on death and for those leaving the UK, and cutting the VAT registration threshold from £90,000 to £30,000, thereby bringing many smaller firms into the tax net. Existing business and agricultural property reliefs would be removed entirely, while the basic-rate dividend tax could rise from 8.75% to 20%.

For working individuals, the proposals include a 1p addition to income tax, a quadrupling of the higher-band National Insurance rate for the self-employed, and the introduction of an 8% National Insurance levy on rental income. Motorists would not be spared: the 5p fuel-duty cut could be reversed with annual increases of 2%, vehicle excise duty would rise for heavier cars, and a pay-per-mile road duty for electric vehicles might be implemented, all measures likely to contribute to inflation and increased living costs. Pensioners could also be hit by a reduction in the tax-free 25% pension lump sum, potentially capped at £40,000, affecting those with substantial pension savings.

Although not all of Bell’s proposals are expected to be enacted in full, the breadth of his recommendations has already provoked concern among taxpayers, property owners, pensioners, and small business operators. Many fear that even partial implementation could mirror the backlash experienced during Reeves’s first Budget, damaging growth and sparking political contention.

Bell’s rise within the Labour Party, accelerated by his radical fiscal outlook, positions him as a likely candidate for future leadership roles, potentially shaping the country’s tax policy for years to come. As autumn approaches, households and investors alike are bracing for a Budget that could significantly alter financial landscapes, from savings and investments to pensions and property ownership.

The upcoming Budget represents a critical test for Rachel Reeves, who must balance the pressing need for revenue with the economic and social consequences of radical taxation measures, while managing the public response to proposals that could touch virtually every facet of British household finances.