Reeves is hoping to plug a hole of £30 billion by capping the amount of someone’s salary that be sacrificed without incurring national insurance payments at £2,000-a-year.
The Chancellor has rebuffed suggestions that she was preparing to instead reducing the tax-free allowance on lump sum withdrawals of pensions for fears that it would hit the elderly.
According to the Times, there are concerns that the move will hit those trying to “do the right thing” by saving for their retirement.
The latest revelation comes after Ms Reeves told the Office of Budget Responsibility (OBR) she will hike income tax at the Budget – seemingly confirming reports that Labour will break its manifesto pledge not to do so.
The Chancellor is preparing to give a difficult Budget on November 26 with pressure on her to fill a hole in Britain’s finances.
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The forecaster has been told by the Treasury that a rise in personal taxation is one of the “major measures” being planned in the fiscal event.
The plans would break with Labour’s headline manifesto pledge: not to increase income tax, VAT or national insurance.
According to The Times, the OBR has also been provided with Reeves’s plan to increase economic growth.
It will now assess the impact of the planned measures and will inform the Treasury of its assessment on Monday before a final round of forecasts shortly before the Budget.
Reports have suggest for weeks that Reeves was planning to use an income tax hike to balance the books.
Some have suggested she may use a simultaneous equal cut in national insurance to protect most workers – while hauling in more revenues from pensioners and landlords.
On Tuesday, the Chancellor told LBC that the UK economy a “mess”, and has “been through the mill” in recent years.
Speaking on Tonight with Andrew Marr, the Chancellor was asked if resigning would be the “honourable” thing to do should she resort to such hiking tax.
But instead, Reeves stood firm and said: “I am not going to walk away because the situation is difficult.
“I was appointed as Chancellor to turn our economy around, and I’m absolutely determined to finish that job.
“What do you think would happen in financial markets if I (resigned)?”
“It depends who took over, I guess,” Andrew retorted, explaining that the easy option would be to “massage the figures” and echo previous Chancellors.
Ms Reeves fired back: “I have been able to build a reputation and have been trusted with the public finances.