Rachel Reeves 'huge tax raid planned' as major allowance faces the axe

Rachel Reeves is considering a masive tax raid on dividends and bank profits as Treasury officials scramble to plug a looming £30 billion hole in the public finances, it is claimed.

According to reports, the Chancellor has been handed a menu of tax-raising options by civil servants ahead of her autumn Budget, including scrapping the £500 tax-free dividend allowance and increasing the tax rate, which currently stands as high as 39%.

A leaked Labour memo, previously linked to Deputy Prime Minister Angela Rayner, is said to have proposed a string of measures that could rake in between £3 billion and £4 billion by targeting business owners and investors.

The Telegraph is reporting that one Whitehall source suggested scrapping the dividend allowance alone could raise more than £300 million — all while allowing Ms Reeves to argue she is not increasing taxes on “working people”, in line with Labour’s pre-election pledge.

But Conservative critics have accused the Chancellor of planning to "put her hands in the pockets of British taxpayers and businesses".

Mel Stride, the Conservative shadow chancellor, warned that Ms Reeves “refused to rule out coming back with more tax rises later this year as the impact of her decisions on the economy worsens”.

He added: “The secret tax-rising dossier outlines how to hit the British people with higher taxes — despite the Chancellor promising not to come back for more taxes after spooking markets last year.

“The truth is Rachel Reeves is more than likely to put her hands in the pockets of British taxpayers and businesses to pay for her mistakes.”

Officials are also said to be weighing up a rise in the surcharge on bank profits - a levy charged in addition to the standard corporation tax rate of 25%. Banks have enjoyed a profits bonanza in recent years while customers suffered from a cost of living crisis.

The surcharge was cut to 3% under the previous government, but it is claimed that Treasury insiders believe it could be increased back to 8% - or set somewhere in the middle - to boost revenues.

The leaked “dossier” of potential tax grabs, first reported in The Sunday Times, has not been denied by Treasury officials, although ministers insist no decisions will be made until the autumn when new economic forecasts are published.

Darren Jones, the Chief Secretary to the Treasury, on Sunday refused to rule out tax hikes during an interview on GB News.

Asked whether more tax rises are on the way, he said: “You’re going to have to wait.”

He added: “Any tax decisions would be subject to the OBR [Office for Budget Responsibility] forecasts,” and insisted it was “right” that ministers take them in an “orderly way”.

The mounting pressure on the Treasury follows a worse-than-expected set of GDP figures last week, with the economy shrinking by 0.3% in April.

The Government has already changed non-dom tax exemptions and is pushing ahead with plans to impose VAT on private school fees - both of which it claims are aimed at ensuring the wealthiest shoulder more of the tax burden.

But business groups warn that targeting dividends and employer National Insurance contributions amounts to a stealth tax on jobs and growth.

Critics say the rise in employer NICs in last year’s Budget - branded a “jobs tax” - will ultimately hit working people by squeezing wages or forcing firms to cut staff.

The idea of scrapping the dividend allowance was floated in a leaked memo from Ms Rayner earlier this year, in which she proposed a raft of revenue-raising measures.

Labour has insisted the Chancellor will make her final decisions only after receiving updated forecasts from the OBR.