Increased speculation that Rachel Reeves is considering breaking the Labour Manifesto pledge with income tax rises

Mark Watson-Mitchell – 28.10.2025

This morning, we have received comments from Daniel Lewin, Tax partner at law firm Katten Muchin Rosenman UK LLP, who notes that:

The difficulty starts with the manifesto pledge.

Promising not to raise income tax, National Insurance contributions and VAT for ‘working people’ effectively meant ruling out increasing the three main taxes that genuinely move the economic needle of the UK’s public finances. 

Got A Proposition For You

Against this background, it feels like the Chancellor is throwing out proposals to see which ones create the least backlash while working out which combination gets her closest to filling the multi-£bn ‘black hole’ the UK public finances face - without breaching the manifesto, unless perhaps the manifesto is now breached. 

Psst …..

The latest rumour - that the Treasury is considering raising the income tax rate by 1p, although it is not clear whether this would be the basic rate (the real revenue generator), or just the higher and additional rate – would probably only genuinely help the public finances if it is some form of basic rate increase. 

Cleaner?

It would be a cleaner solution compared to other ideas like the introduction of a mansion tax but also an indisputable manifesto breach which is already stretched while Labour is struggling to hang on to public support. 

Thought would need to be given how to protect those that would be most affected.

The problem is that the alternatives suggested – such as the imposition of 15% National Insurance contributions on the profits of partners of UK LLPs (particularly, lawyers and accountants – mostly ignoring other business sectors that also operate under the LLP structure such as asset managers that have already been hit by the non-dom and carried interest changes) – will raise some revenue, but also further damage UK PLC as a destination for talent and economic growth.

The highest marginal tax rate for partners would increase to around 54%.

This will not be the way to help the economy grow. 

For some sectors such as GPs who are not the highest earners, it would also be hard to argue that they are not hit by a significant manifesto breach.