There’s been a fresh stir inside Keir Starmer’s Cabinet as Deputy Prime Minister Angela Rayner pushes for a series of tax increases aimed squarely at high earners and savers.
Rayner has reportedly urged the Chancellor, Rachel Reeves, to consider hiking taxes on the wealthy, revealing some clear differences in approach among top Labour leaders.
Secret Memo Outlines Eight Proposed Tax Hikes
At the heart of the debate is a confidential memo written by Rayner and shared with the Chancellor’s team earlier this year.
The document suggests eight separate tax changes, including bringing back the pensions lifetime allowance—a cap on how much you can save in a pension before facing extra taxes—and tightening dividend tax rules.
The proposals also target people who pay the additional rate of income tax, as well as recommending a higher corporation tax rate specifically for banks.
According to estimates within the memo, these moves could bring in between £3 billion and £4 billion each year.
But insiders warn that the actual figure might be even higher, as not every proposal was given a full financial breakdown.
Rayner Frustrated with Defending Spending Cuts
Friends and allies of Angela Rayner say she’s grown increasingly frustrated with constantly having to defend spending cuts in the government’s budget.
While a source close to the Deputy Prime Minister declined to comment directly on the memo, they pointed out that it’s not unusual for ministers or officials to prepare such policy papers behind the scenes.
However, the Chancellor is known to be firm about having the final say on tax and spending decisions, which means this push from Rayner is adding tension inside the government.
Proposals Aim to Protect Working People While Targeting the Wealthy
The memo, labeled ‘official’ and dated mid-March, was titled ‘alternative proposals for raising revenue.’
It insisted that these policies wouldn’t raise taxes on working people but would instead focus on making the wealthy pay more.
One major suggestion was to reinstate the pensions lifetime allowance, which currently limits how much can be put into a pension tax-free before higher charges kick in.
Rayner also recommended freezing the income level at which the highest rate of income tax applies—currently set at £125,140 until 2028.
Keeping this threshold frozen would gradually pull more people into the top tax bracket over time.
Another idea was to scrap inheritance tax relief on shares traded on the Alternative Investment Market, which mainly benefits wealthier investors.
Tory Shadow Chancellor Criticizes Labour’s Tax Plans
Shadow Chancellor Mel Stride slammed the proposals, accusing Labour of wanting to launch “another tax raid” on people’s finances in the autumn budget.
He suggested the memo explains why Labour hasn’t ruled out increasing taxes again soon.
Meanwhile, Rachel Reeves is reportedly still planning to reduce the annual cash ISA allowance from £20,000 to £4,000 in the upcoming Budget, despite some reports suggesting she might have backed away from that idea.
The change is aimed at encouraging savers to invest in stocks and shares ISAs instead of cash accounts.
Clarifying the ISA Allowance Confusion
Reeves gave an interview where she said she wasn’t going to lower the overall ISA contribution limit, which some took as a retreat.
But Treasury officials quickly clarified that she was referring only to the total annual ISA limit—not the cash ISA allowance specifically.