Andy Burnham’s new government will set out its fiscal plan on 28 October during chancellor John Healey’s first Autumn Budget and rumours are circulating that it could include tax hikes for top earners.
Burnham and Healey have both committed to stick to the previous government’s fiscal rules and the 2024 Labour manifesto pledge to not raise any of the ‘big three’ taxes – income tax, National Insurance contributions, or VAT.
However, other tax hikes could be on the table. Experts say these are increasingly likely considering the fiscal pressure the government is under to meet existing funding commitments while also finding money for new policies.
Start your trial of MoneyWeek today
Get unparalleled financial insight, analysis and expert opinion you can profit from.
Start your trial
Sign up for MoneyWeek’s free twice-daily newsletter.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Analysis by the Institute for Fiscal Studies (IFS) suggests the chancellor will have to find around £35 billion in the upcoming Budget to avoid real-terms cuts in public spending while honouring a promise to raise defence spending to 3% of GDP by 2030 and increase health spending.
Latest Videos FromMoneyWeek
It comes after inflation rose following the start of the Iran war, and experts expect price growth will continue rising for the rest of 2026 at peak at around 4% at the start of 2027.
Prices increasing means government departments will need more money to afford planned spending.
Helen Miller, director of the IFS, said: “A 'steady-as-she-goes' Budget is not an option available to the chancellor. Choosing to stay the course with the inherited tax and spending plans would mean allowing inflation to blow departments' spending plans off course.
"Simply pencilling in implicit cuts that he has no intention of delivering would make the Budget a work of fiction.”
The IFS said the government will need to increase taxes, cut spending or choose a mixture of both.
Will investments be taxed more in the Budget?
The primary way investments are taxed in the UK is through capital gains tax (CGT). This is levied at rates of 18% for basic rate taxpayers and 24% for higher and additional rate taxpayers on all gains above the £3,000 annual tax-free CGT allowance.
Donors and several senior figures within the Labour party have suggested increasing capital gains tax to be in line with income tax bands. Such a reform would bring CGT rates to 20% for basic rate taxpayers, 40% for higher rate taxpayers, and 45% for additional rate taxpayers.
The policy was previously proposed by defence secretary Wes Streeting while he was running for Labour leadership and by energy entrepreneur and major Labour donor Dale Vince.
However, Healey is understood to have rejected these proposals after figures in the Treasury warned that the policy would make Britain less attractive to investors, the Financial Times reports.
A spokesperson for the Treasury said: "As has always been the case, decisions on tax are a matter for the Chancellor to set out at fiscal events, rather than routinely commenting on rumour, speculation or proposals.”
Rachel Griffin, tax and financial planning expert at Quilter, believes rejecting the proposal would be the right move.
She said: “Equalising capital gains tax with income tax rates might have appeared to offer a straightforward way to raise revenue while adhering to Labour's manifesto pledge not to raise taxes for working people. In reality, investor behaviour plays a significant role in determining how much tax is ultimately collected.
“Capital gains tax is particularly sensitive to behavioural change and, if rates were pushed significantly higher, many investors may simply choose to hold assets for longer rather than crystallise gains.
“Indeed, one of the risks of sharply increasing CGT rates is that it reinforces a ‘hold until death’ mindset. Rather than selling assets and triggering a tax charge, individuals may opt to retain them indefinitely and pass them on through their estate, benefiting from the capital gains tax uplift on death. That can reduce transactions, limit the recycling of capital and ultimately mean revenues fall short of expectations.”
Will property be taxed more in the Budget?
Former chancellor Rachel Reeves targeted property owners in the 2025 Autumn Budget when she announced a new ‘mansion tax’.
From April 2028, all homes worth £2 million or more are set to pay between £2,500 and £7,500 more a year as part of an additional council tax surcharge. High value homes will be split into four bands, and the more expensive your home is, the more you would pay.
In September, The Times reported Healey was looking at reducing this threshold to £1.5 million to rake in around £800 million more in tax revenue.
However, the Financial Times reported on 11 October that Healey has decided against reducing the ‘mansion tax’ threshold following backlash from Labour MPs and worries that changing the policy before it was implemented would hurt public support.
The i Paper reported in summer that Burnham could look at replacing stamp duty and council tax with a flat proportional property tax or land value tax, but after backlash from many in the property industry, Number 10 distanced itself from the proposal, with a spokesperson saying rumours Burnham was considering the taxes were “not true”.
Will a wealth tax be introduced in the Budget?
Since last year there has been a lot of speculation over whether the UK could introduce some form of wealth tax – a tax levied on net wealth rather than income.
Reeves ruled it out in the run-up to her 2025 Budget, but with a new chancellor, some worry a wealth tax could be on the cards again.
New fears were stoked when Burnham refused to rule out a wealth tax during an interview with broadcaster and businessman Gary Lineker on 15 July.
When asked if he would implement one, Burnham said: “I don’t want to come in and create new divisions and pitch people against one another. I don’t want to rule things out right now. I do believe we need a greater sense of fairness, and people feeling that things are being done in the right way and a fair way.”
He added: “Decisions to be taken in time are going to be difficult, I’m not going to shy away from that. We are going to have to work quite hard to make sure we can pay our and at some point that might be having to ask for a little more.”
Although the prospect of increased taxes can be worrying, don’t plan your finances based on rumours, rather than officially announced policies.
Sarah Coles, head of personal finance at AJ Bell, said: "When faced with the threat of higher taxes, people will always want to take steps to protect themselves. We know from previous years just how much damage people can do to their finances if they feel forced into panicked decisions."
Will borrowing rise in the Budget?
Burnham and Healey have said repeatedly they will follow the previous government’s three fiscal rules.
The most important two of these rules say that the current budget should be on course to be in balance or surplus by 2029/30, and public debt should be forecast to be lower in 2029/30 than 2028/29.
These make it more difficult for the government to borrow money to use for public spending, however Burnham said he will use “flexibility” within the fiscal rules in a briefing to political journalists on 20 July.
The first sign of what this may look like came from a report in The Times that revealed the Treasury was drawing up plans to increase borrowing by potentially as much as £9 billion a year by exploiting a loophole in the fiscal rules that allows borrowing to fund infrastructure investment or equity in companies.
A spokesperson for the Treasury said: “The chancellor is fully focused on his priorities, to boost business, help with the cost of living and support people in every postcode. As has always been the case, the chancellor will set out decisions at fiscal events, rather than routinely commenting on rumour, speculation or proposals."
