Autumn Budget 2025: Predictions

What to Expect from the Autumn Budget 2025

The Autumn Budget 2025 is scheduled for Wednesday 26 November and, as media speculation builds, we thought that it would be helpful to summarise the key options being debated and any action that you should be considering.

While the size of the fiscal ‘black hole’ is a matter for debate, the general consensus is that the deficit cannot be filled with budget cuts alone. Therefore, additional revenues need to be raised through increased taxes – the question is which ones? In our view the Chancellor has three options:

1. Increase one big tax;
2. Introduce a new tax;
3. Make multiple changes to a number of taxes.

1. Increase one big tax

At the beginning of the summer, we would have ruled out increasing one big tax entirely. This is because the biggest tax revenue raisers are income tax, VAT (Value Added Tax) and National Insurance contributions (‘NIC’) (collectively they raised over 57% of total tax revenues in 2024/25) and the Labour Party 2024 manifesto made a commitment not to increase these taxes.

On 10 November 2025 in an interview with the BBC, Chancellor Rachel Reeves explained that to be consistent with manifesto commitments would require “…things like deep cuts in capital spending.” This, together with the following statement from Reeves: “What I can promise now is I will always do what I think is right for our country. Not the politically easy choice, but the things that I think are necessary to put our country on the right path” means that most are inferring an indication that income tax rates will be increased in the Autumn Statement, although this is yet to be confirmed.

Possible Income Tax Increase

The Institute for Fiscal Studies estimates that a one percentage point increase in the 20% income tax rate alone could raise as much as £8.5 billion a year by 2029/30. The Chancellor could see this as a way to fund an end to the freeze on the tax-free personal allowance (to, inter alia, prevent pensioners paying tax on their state pensions) and the removal of the two-child cap on child benefit payments, which are both very expensive measures.

The Labour Party have pledged to not increase taxes that ‘working people’ pay. It is possible that income tax rates on dividends could be raised (e.g. from 39.5% to 45% for top rate taxpayers) without breaking the manifesto pledge. However, some working people who are also shareholders in their employer, extract value from the company by way of dividends and so this change would impact them too. However, it seems unlikely that the manifesto pledge was made to protect shareholders of companies.

National Insurance Contribution Rates

In keeping with the pledge not to raise taxes for working people, an “income tax/NIC switch” has been suggested whereby employee National Insurance contribution rates are reduced by 2% percentage points and this is added on to the income tax rates (so 22%, 42% and 47%), which means that employees pay no additional tax (i.e. top rate including NIC becomes 47% with no additional rate NIC). This could raise significant amounts from those who pay income tax but not employee NIC i.e. pensioners, landlords and the self-employed. However, this change would need to take place from the start of the tax year, due to the way that PAYE is implemented, and any pre-announcement could see a change in taxpayer behaviour (e.g. bringing forward income to the current tax year, where the taxpayer has that flexibility). Consequently, the amounts raised may not be as much as anticipated and the government would need to wait for it.

VAT is known as a regressive tax and usually when it is increased it is the end consumers who bear the cost, which means that an increase is unlikely. Other potential VAT changes could however be possible as we discuss below.

The rates of Capital Gains Tax (‘CGT’) rates were increased in the 2024 Budget, although we cannot rule out further rate increases. However, people do react and can often hold off from selling an asset in the hope of a lower rate applying in the future. There is therefore a real danger that if CGT rates are pushed too high revenues will fall.

Corporation tax is already at a fairly high rate when compared globally so we doubt that there is much appetite to raise this any further.

2. Introduce a new tax

The second option speculated for the Autumn Budget is to create a new tax, which is likely to be another tax on capital. Several potential new taxes are under consideration, from a wealth tax targeting high-net-worth individuals, to property-focused options such as a mansion tax or a broader land value tax. Proposals for an “exit tax” on those leaving the UK is also a subject of interest.

Wealth Tax

This could be in the form of a wealth tax whereby there is an additional tax on owning wealth as well as selling it (through CGT) or inheriting it (through inheritance tax). There are three countries in the world that have a proper wealth tax – Switzerland, Norway and Spain. Only Spain also has both Capital Gains Tax and inheritance tax (‘IHT’) having recently introduced a new wealth tax and to date it has raised only modest amounts.

Mansion Tax

An alternative new tax would be a mansion tax where there is an annual tax on homes worth above a certain threshold. In the 2014 Labour Party manifesto a mansion tax was suggested for properties worth more than £2 million, which it was estimated would raise over £1.7 billion. There was not much additional detail provided at the time on whether it would apply to all homes or just second homes and how they would deal with valuation and liquidity issues. These are all the potential barriers for introducing this type of tax, along with the significant cost of implementing a new tax system.

Land Value Tax

A land value tax would be a more radical approach as it would remove all existing taxes on land such as Capital Gains Tax, Council Tax, and Stamp Duty Land Tax (‘SDLT’) and replace it with an annual tax paid by the owner which is split between local and central government. The challenge is that most models of a land value tax show that, although this could arguably be a simplification, it is unlikely to raise significant additional revenues and would be costly to implement. This might be on the long-term agenda, but it seems unlikely to be included in the 2025 Autumn Budget.

Exit Tax

There has been a lot of speculation in the media in recent weeks about a “settling up charge” or an exit tax for individuals when they leave the UK. High profile entrepreneurs leaving the UK in order to save future CGT often make the headlines. There is no detail on how a “settling up charge” would work, which assets it would include (UK and non-UK?) or the potential tax rate and how it would interact with tax paid elsewhere. The challenge for the government is to ascertain how much could it raise and what the behavioural consequences would be. Other countries do have an exit tax such as Canada and Australia but these are often deferred so you could end up with a scenario where you get the behavioural impact without the additional tax revenues which would not help the government’s growth agenda.

The challenge with an exit tax is that if it is pre-announced then it is likely that taxpayers will bring forward their emigration so there needs to be an element of surprise. The fact that the “settling up charge” has been leaked in the media makes it seem unlikely, in our view, to be actually implemented. The risk is that the rumour of an exit tax makes entrepreneurs leave the UK before the Autumn Budget so there is no additional tax revenue and even fewer entrepreneurs in the UK.

3. Make multiple changes to a number of taxes

The third option is to make tweaks to a number of different taxes and there is plenty of speculation about what these changes could be and whether they could potentially effect pensions, inheritance tax and capital gains tax.

Pension Contributions

There are many rumours about pensions. These include a possible reduction in the amount you can withdraw as a lump sum tax free (perhaps as low as £100,000), a flat rate of income tax relief at 20% for pension contributions (currently relief is given at the taxpayer’s marginal rate of income tax up to 45%) and the removal of the employer NIC exemption for pension contributions made under salary sacrifice. Remember with pensions coming within the IHT net from 6 April 2027, they are already a hot topic with small changes having potentially a big impact on individuals’ retirement plans.

Inheritance Tax and Gift Tax

In terms of inheritance tax, clients are worried about a lifetime gift tax or an extension of the ‘seven-year rule’ for lifetime gifts to be exempt to perhaps as long as 10 years. These changes would not appear to raise significant sums (IHT generated a mere 0.7% of total tax revenues in 2024/25) but we are saying to clients that if you were planning to make gifts in the short term, it would be sensible to consider making these before the Autumn Budget while the current rules apply. It is unlikely that any changes will be retrospective, but IHT changes can be immediate, and the common consensus is that the rules are unlikely to get more generous. It is important to remember that along with IHT, there could be CGT and SDLT implications of non-cash gifts and so tax advice should be obtained beforehand.

Changes to Capital Gains Tax

The Capital Gains Tax uplift on death has been mentioned in the IFS report published in early October, which forecasts that if assets are no longer rebased to current value on death this would generate an extra £2.3 billion a year. Private Residence Relief, which is the CGT relief on your main home, is also a costly tax relief which is currently uncapped so there have been rumours about the introduction of a cap. The question is about the right level of the cap as well as how homeowners fund the tax as typically there is little or no cash on the sale of a main home where the taxpayer is reinvesting a new property. There have been articles about deferring the capital gain until death or when equity is released which would deal with these issues but will not help the government to fill their fiscal black hole as it is unlikely to raise significant additional tax revenue in the short term.

Reportedly the Chancellor is also considering extending employer NIC to include partners in Limited Liability Partnerships, to whom the tax does not currently apply due to their self-employed status, as well as rental income.

VAT (Value Added Tax) Threshold

The VAT threshold, which is when someone running a business needs to register for VAT, is currently £90,000. Research shows that this is a barrier for businesses to exceed that amount due to the additional administrative burden of VAT returns as well as the increase in their charges to include VAT.

For businesses where a significant proportion of their customer base cannot recover the VAT charge, they could be at a commercial disadvantage to their competitors who are below the VAT threshold and therefore do not have to charge VAT. To remove this distortion, a number of other countries have set the threshold for VAT (or equivalent tax) at a low level (e.g. £10,000) and so we could see something similar in announced in the Autumn Budget.

With so many rumours and more expected to come between now and the Autumn Budget 2025, it is hard for clients to know what to do if anything. Our general advice is always to do no harm by which we mean do not undertake tax planning just in the hope of potentially saving some additional tax in the future.

If, however, you have some planning already underway (for example, making direct gifts, gifting your Business Property Relief qualifying shares into trust whilst the relief is still at 100%, paying a dividend from your family business), then you should consider whether you undertake these transactions prior to 26 November 2026. Although the tax consequences may not get worse, they are unlikely to get any better for most of us.

If you have any questions regarding the possible contents of the Autumn Budget 2025, or would like to discuss any of the contents of this article, please don’t hesitate to get in touch with us.