Rachel Reeves is planning to introduce a £2 billion tax increase targeting some of the wealthiest individuals in the country to generate additional funds for public spending. The Chancellor is anticipated to unveil a new levy on those utilizing limited liability partnerships as a means to address a significant financial shortfall left by the Conservative party.

These partnerships, commonly used by professionals such as lawyers, doctors, and accountants, provide tax advantages to over 190,000 individuals, exempting them from employers’ national insurance contributions by treating them as self-employed. Rachel Reeves argues that this arrangement is inequitable and is set to announce the change during the Budget presentation.

The proposed measure is part of a broader strategy to focus on high-income earners, with the Chancellor emphasizing the principle that those who are more affluent should contribute proportionately to taxes. Additionally, Reeves is expected to introduce a “mansion tax” imposing capital gains tax on the sale of luxury properties, citing the significant impact of Brexit and austerity on public finances.

Forecasts from the Office for Budget Responsibility (OBR) indicate a likely downgrade in Britain’s growth projections, raising concerns that the Chancellor may need to reconsider her commitment not to raise income tax, VAT, or national insurance to address budgetary challenges. Ms. Reeves highlighted the impact of austerity measures, reduced capital spending, and Brexit on the economy, underscoring the need to strengthen relations with the EU to mitigate associated costs.

Economists, including Stuart Adam from the Institute for Fiscal Studies, have expressed skepticism about the preferential treatment given to partnership structures and cautioned that tax hikes could discourage work or prompt individuals to relocate. The focus remains on addressing fundamental issues related to taxation of self-employed individuals compared to employees, as changes to tax policies may have broader implications beyond immediate revenue gains.