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5 ways Reeves could raid your piggy bank to plug £41bn financial black hole

ended 07. August 2025

EXPERTS have revealed five ways Chancellor Rachel Reeves could raid your piggy bank to plug an enormous £41bn financial black hole in the economy.

Taxes must rise in the autumn if Reeves is to meet her self-imposed borrowing rules, according to the National Institute of Economic and Social Research (Niesr).

The government is on track to miss the target it has set itself by £41.2bn, it said.

It recommended "a moderate but sustained increase in taxes" including reform of the council tax system to make up the shortfall.

Financial experts have shared five ways that Reeves could raid your piggy bank to help plug the gap.

  1. Raising Insurance Premium Tax for businesses
  2. Raising the state pension age to 70
  3. ‘Reforms’ to council tax
  4. An expansion of stamp duty charges
  5. Expand VAT to items that are exempt - such as books or digital services

Lee Petts, Founder at Preston-based Fifty2M, believes Insurance Premium Tax for businesses will be raised.

He added: "I wouldn't be at all surprised to see Insurance Premium Tax being hiked for businesses given that there are many forms of insurance that are compulsory, such as Employer's Liability and commercial motor insurance, that make them unavoidable and therefore a stable and consistent source of tax revenue for the Exchequer. 

"Even just a small increase on millions of premiums could potentially boost Treasury receipts quite significantly, and it's likely the Chancellor will judge this to be a move with little political risk if the rise is not too big. 

"However, anything seen as reaching into the pockets of small businesses when we're still in a cost-of-doing-business crisis will not go down well - especially against a backdrop of huge boosts to public sector wages. The government needs to stop trying to find ways to rinse taxpayers and instead focus on finding savings through efficiencies in order to balance the books."

Samuel Mather-Holgate, Independent Financial Adviser at Swindon-based Mather and Murray Financial, believes the state pension age will be raised to 70.

He said: "Reeves will no doubt change her borrowing rules which could sort the whole situation. Markets have suspected this is coming, so they shouldn't react too badly as long as moderation is sought in other areas. 

"The state pension system is ripe for squeezing, so an increase to the state pension age is coming down the tracks, probably to 70. Changing the triple lock would save a fortune, but politically difficult as the older generation vote."

Scott Gallacher, Director at Leicester-based Rowley Turton, mentioned numerous ways Reeves could plug the gap, including 'reforms’ to council tax.

He said: "The risk is that further tax rises make the UK less attractive to investors and discourage the very growth we need to plug the gap. If Reeves does look for stealthier options, there are plenty: freezing thresholds, cutting reliefs, or tightening pension rules. 

"The plan to bring unused pensions into the IHT net is a stealthy but costly tax grab. We could also see so-called ‘reforms’ to council tax, capital gains tax alignment, or the removal of mortgage interest relief for landlords — all framed as ‘fairness’ while quietly helping to fill the £41bn hole."

Kundan Bhaduri, Entrepreneur at London-based The Kushman Group, thinks an expansion of stamp duty charges will be implemented.

He said: "Rachel Reeves must now perfect the ancient art of extracting maximum feathers with minimum squawking. Property values have steadily disconnected from their 1991 council tax bands so the coming assault is perfectly clear. The Chancellor for sure will not touch headline rates of income tax or VAT. 

“Instead, she will execute what might be called a 3-prong Operation Stealth: a council tax revaluation that will triple bills in the South East, a quiet alignment of Capital Gains Tax with income tax rates, and an expansion of the stamp duty surcharge that will make buying property massively unappealing.”

Tony Redondo, Founder at Newquay-based Cosmos Currency Exchange, said expanding VAT to exempt items like books or digital services could raise billions.

He said: “What a mess, of her own making. According to the respected NIESR, Chancellor Rachel Reeves must plug a £41.2bn fiscal gap without breaking Labour’s pledge not to raise income tax, VAT, or National Insurance for 'working people' and not break her 'iron-clad' fiscal rules. 

"Five stealth tax strategies include extending the income tax threshold freeze, raising £8.2bn via fiscal drag. She could reform council tax or introduce a land value tax, targeting wealthy landowners. She could expand VAT to exempt items like books or digital services, subtly raising billions. 

"She could cut pension tax relief for high earners or capping lump sums, potentially yielding £10–15bn and hiking employer NICs or levying tech/energy firms, generating £5–15bn. Reeves has a near-impossible juggling act this autumn to try and not bury the UK economy or spook the bond markets.”

6 responses from the Newspage community

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Lee Petts
Founder at Fifty2M
I wouldn't be at all surprised to see Insurance Premium Tax being hiked for businesses given that there are many forms of insurance that are compulsory, such as Employer's Liability and commercial motor insurance, that make them unavoidable and therefore a stable and consistent source of tax revenue for the Exchequer.

"Even just a small increase on millions of premiums could potentially boost Treasury receipts quite significantly, and it's likely the Chancellor will judge this to be a move with little political risk if the rise is not too big.

"However, anything seen as reaching into the pockets of small businesses when we're still in a cost-of-doing-business crisis will not go down well - especially against a backdrop of huge boosts to public sector wages. The government needs to stop trying to find ways to rinse taxpayers and instead focus on finding savings through efficiencies in order to balance the books.
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We’re already highly taxed in the UK, so simply hiking rates again isn’t the answer. Rachel Reeves should focus on delivering real economic growth — and any tax changes should be tied to genuine growth incentives.

The risk is that further tax rises make the UK less attractive to investors and discourage the very growth we need to plug the gap.

If she does look for stealthier options, there are plenty: freezing thresholds, cutting reliefs, or tightening pension rules. The plan to bring unused pensions into the IHT net is a stealthy but costly tax grab.

We could also see so-called “reforms” to council tax, capital gains tax alignment, or the removal of mortgage interest relief for landlords — all framed as “fairness” while quietly helping to fill the £41bn hole.
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Reeves will no doubt change her borrowing rules which could sort the whole situation. Markets have suspected this is coming, so they shouldn't react too badly as long as moderation is sought in other areas.

The state pension system is ripe for squeezing, so an increase to the state pension age is coming down the tracks, probably to 70. Changing the triple lock would save a fortune, but politically difficult as the older generation vote.
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Rachel Reeves must now perfect the ancient art of extracting maximum feathers with minimum squawking. Property values have steadily disconnected from their 1991 council tax bands so the coming assault is perfectly clear. The Chancellor for sure will not touch headline rates of income tax or VAT. Instead, she will execute what might be called a 3-prong Operation Stealth: a council tax revaluation that will triple bills in the South East, a quiet alignment of Capital Gains Tax with income tax rates, and an expansion of the stamp duty surcharge that will make buying property massively unappealing.

Her real genius will lies in the presentation though. Each measure will be marketed as a technical correction, closing a Tory loophole, or my personal favourite, a 'simplification of the tax code'. The pension tax relief for higher earners will be sacrificed on the altar of fairness while IHT threshold will be conveniently frozen dragging us fiscally.
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If HMRC wants to close the tax gap without hiking headline rates, it needs to get smarter, not just stricter. Billions are leaking from underdeclared income, especially from cash-based trades, side hustles, landlords and digital platforms. While most employees are taxed at source, others operate in the grey area with minimal scrutiny. The hidden economy alone is estimated to cost the Treasury around £3.7 billion a year, with tax evasion from undeclared income and inflated expenses pushing that figure closer to £9–10 billion. Smarter use of data, from payment apps, letting agents, e-commerce platforms and banks, all backed by AI-driven enforcement, could realistically claw back £5–7 billion annually within a few years. That’s nearly a fifth of the current £41,000,000,000 fiscal gap without touching rates or thresholds. The tech exists. What HMRC needs now is the political will to deploy it at scale and make tax fairness feel real.
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What a mess, of her own making. According to the respected NIESR, Chancellor Rachel Reeves must plug a £41.2bn fiscal gap without breaking Labour’s pledge not to raise income tax, VAT, or National Insurance for 'working people' and not break her 'iron-clad' fiscal rules. Five stealth tax strategies include extending the income tax threshold freeze, raising £8.2bn via fiscal drag. She could reform council tax or introduce a land value tax, targeting wealthy landowners. She could expand VAT to exempt items like books or digital services, subtly raising billions. She could cut pension tax relief for high earners or capping lump sums, potentially yielding £10–15bn and hiking employer NICs or levying tech/energy firms, generating £5–15bn. Reeves has a near-impossible juggling act this autumn to try and not bury the UK economy or spook the bond markets.