What are Rachel Reeves's options after U-turn on income tax rates?

"Rachel Reeves has ditched a manifesto-busting plan to increase income tax rates for the first time since 1975 in this month's budget. The chancellor is widely expected to increase taxes as she attempts to find billions of pounds to repair the public finances. She is expected to raise between 20bn and 30bn. With an income tax rise off the table, here are some of her other revenue-raising options on 26 November as she seeks to build up more headroom against her tight fiscal rules which she adopted last year."

"In normal times, the thresholds at which taxpayers move into paying the higher and additional rates of income tax move up each year in line with inflation. Rishi Sunak froze these thresholds for four years in his 2021 budget, during the pandemic. Jeremy Hunt then extended the freeze for another two years. Reeves suggested in her budget last year that extending the freeze further would hurt working people. But the measure has long been seen by economists as among the most probable options this time around."

"Raises: 7.5bn a year This measure has been well-trailed as a way of helping the Treasury to offset the rapid decline in revenue from fuel duty in the years ahead as more motorists switch over to electric vehicles. It is expected to cost EV drivers 3p a mile. Initial revenue for the Treasury is likely to be low but will build up over the coming years."

An income tax rise has been abandoned for the November budget despite expectations that the chancellor needs to raise between £20bn and £30bn to repair public finances. Alternatives under consideration include extending the freeze on income tax thresholds, which economists view as probable despite concerns about impacts on working people. A new EV fuel duty is proposed, expected to cost electric vehicle drivers 3p a mile and build revenue over time. A rise in gambling taxes, potentially up to around £3bn, is being considered following lobbying and thinktank recommendations. Employer-targeted schemes are also mentioned as possible revenue sources.

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