Prime minister Rishi Sunak is considering changes to the top rate of income tax next week after the Treasury warned that more money was needed to protect pensions and benefits, the Telegraph has reported.
The Telegraph said that raising the 45% top rate, or lowering the £150,000 annual income threshold at which it kicks in are options now being discussed.
Such a move would be a dramatic reversal of the situation from September, when Liz Truss abolished the 45% rate, before reinstating it later when financial turmoil in the markets forced her to abandon her plans.
The Treasury is also looking at increasing the National Insurance rate paid by employers by 1.25 percentage points, the paper said.
Raising the rate of income tax or national insurance would break an explicit promise made in the Tory 2019 election manifesto, a document Sunak has stood by since entering No. 10.
But a new scramble for cash has erupted after weekend Downing Street talks, which clarified that more money was needed to protect the pension triple lock and ensure profit growth in line with prices.
Government ministers have been urged to “think the unthinkable”, a Whitehall source said of initial plans to protect spending as without the biggest tax increases: “It just doesn’t add up.”
The government is attempting to fill a near £60bn fiscal black hole with a combination of spending cuts and tax increases and there has been fevered speculation as to the areas that could be targeted.
Reports in recent weeks have centred around a freezing of income tax and inheritance tax thresholds, changes to capital gains and dividend taxes and extending the windfall tax on energy companies.
The pensions triple lock and benefit payments have also come under the microscope.
The chancellor, Jeremy Hunt, will unveil his autumn statement on 17 November.