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What tax hikes could be on the cards as a result of the benefits policy U-turns?

ended 27. June 2025

A Mail journalist is asking for expert comments on what tax hikes could be on the cards as a result of the benefits policy U-turns?

Work and Pensions Secretary Liz Kendall confirmed that the revised benefits cuts will only affect future claimants, with no changes for current personal independence payment (Pip) recipients.

Ruth Curtice, chief executive of the living standards think tank Resolution Foundation, suggested the cost of the welfare changes is likely to be over £3bn. That’s because changes to personal independence payment (Pip) are estimated to cost between £1.5bn and £2bn, she says. Curtice also says that undoing the freeze on universal credit (UC) health-related support is expected to cost another £1bn. On top of this, she says the winter fuel allowance U-turn would cost a further £1bn.

  • Do you agree with Ruth Curtice?
  • Does this mean tax hikes could be on the cards? Where could the Government raise taxes to pay for it? Any predictions?

Responses ASAP please.

3 responses from the Newspage community

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Editor
Samuel Mather-Holgate
Managing Director & IFA at Mather and Murray Financial
With Starmer doing more U-turns than someone doing the bleep test, taxes are going up. There’s no way that other departments can mitigate these changes to their budget. It’s hard to see them breaking their manifesto pledge, so national insurance could take a further hike or fuel duty is another big revenue raiser. If they are to increase PAYE, it will only be for the highest earners so as not to alienate their voters further still.
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John Woolfitt
Director at Atlantic Capital Markets
A “stealth tax” manoeuvre will be high on the cards. Income tax allowance and the higher-rate threshold currently rise with inflation. Freezing or delaying future increases effectively raises income tax, without officially having to announce a hike. Targeting high earners and wealth transfers could also be seen and a populist move as the government tries to sure up support from the broader electorate. Increasing CGT, further IHT reforms, increasing pension taxation by excluding them from IHT relief are also very real prospects. Even proposals to tax unrealised gains, which on the face of it is a crazy notion but does highlight the pressure the Chancellor is under. Labour has already increased employer NI contributions but they could easily attack british busines further with a revisit to corporation taxes, VAT exemptions, or duties as well. but this will really impact the already fragile business confidence in the UK.
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Editor
Tony Redondo
Founder at Cosmos Currency Exchange
Ruth Curtice’s £3bn+ estimate for welfare U-turns is solid as it aligns with IFS figures. The bond markets will be on the lookout and will punish Reeves if she rows back on her fiscal rules.

"Further tax hikes in this Autumn’s budget seem to be the only viable option to cover this. Options include raising Capital Gains Tax (CGT) to 40% (£5–10bn), tightening Inheritance Tax (IHT) (£2–3bn), hiking Corporation Tax (£2–5bn), or targeting wealth/pension relief (£1–2bn each).

"CGT and IHT are most likely fitting Labour’s fairness narrative, all risking further economic slowdown if not an outright recession.