State pensioners across the UK could be hit with a £1,000 tax increase in the autumn Budget, experts are warning. The annual Budget will take place later this month on Wednesday, November 26, and will see Chancellor Rachel Reeves outline tax, spending and borrowing plans for the year ahead.

The Budget announcement will impact individuals across the country, as well as businesses and the UK economy as a whole. Speculation has been rife that Reeves will need to break her manifesto pledge and increase income tax to plug a £50 billion black hole in the nation’s public finances, which could have significant repercussions for state pensioners. According to financial experts at AJ Bell, one way Reeves could tackle the issue of plugging public finances is by increasing Income Tax while cutting National Insurance at the same time.

The possible move would see Income Tax rise by two percentage points, which would take basic rate tax to 22%, while the starting rate for National Insurance would drop from 8% down to 6%.

Experts say such a move wouldn’t affect most people as the hike one one would be cancelled out by the reduction on the other, but the same would not be true for pensioners.

As pensioners don’t have to pay National Insurance it would mean that an increase to Income Tax wouldn’t be offset, which could result in a tax increase of more than £1,000 for some.

Laura Suter, director of Personal Finance at AJ Bell, explains: “One group that would definitely be hit by this proposed move is pensioners. Once you reach state pension age, you don’t have to pay National Insurance, so it means any pensioners who are paying basic-rate income tax would see an increase in their income tax bill but it wouldn’t be offset by the cut to National Insurance.

“Someone with a taxable retirement income of £35,000 would face a tax hike of almost £450, while a pensioner with an income of £65,000 would be stung with a tax increase of over £1,000.

“While hitting pensioners in the pocket will clearly be unpopular – particularly in the wake of the Winter Fuel Payment fiasco – it may be viewed as the least bad option to raise a chunk of the tens of billions of pounds the chancellor needs to balance the books.”

The National Institute of Economic and Social Research (Niesr) has said that a 2p hike to the basic rate of Income Tax is likely to be needed in the Budget, further raising speculation that Reeves will break her manifesto pledge and increase Income Tax rather than “messing around” with changes to marginal taxes.

Reeves pledged not to raise taxes for working people in Labour’s general election manifesto, which is widely interpreted to mean income tax, VAT, employee National Insurance contributions and corporation tax.

In last autumn’s Budget, she instead raised employers’ National Insurance contributions (NICs) and said at the time she would not repeat such a tax-rising budget “ever again”. But she has already hinted at plans to break Labour’s pledge, refusing to rule out tax hikes in her pre-Budget speech on Tuesday and warning “each of us must do our bit”.

Speaking in Downing Street, the Chancellor said: “As I take my decisions on both tax and spend, I will do what is necessary to protect families from high inflation and interest rates, to protect our public services from a return to austerity and to ensure that the economy that we hand down to future generations is secure with debt under control.

“If we are to build the future of Britain together, we will all have to contribute to that effort. Each of us must do our bit for the security of our country and the brightness of its future.”

Reeves repeatedly refused to confirm whether she will stick to the manifesto commitment, telling reporters: “We’ve got to do the right things. The problem of the last 14 years is that political expediency always came above the national interest, and that is why we are in the mess that we are in today.”