Will taxes rise further in the 2025 Autumn Budget?
Speculation about tax hikes is ramping up ahead of the Autumn Budget on 26 November, touching everything from property to inheritances


Tax hikes are widely expected this autumn as weak economic growth and stretched public services put pressure on the public purse.
Beleaguered chancellor Rachel Reeves has finally confirmed a date for the event after gilt yields spiked earlier this week, sending UK borrowing costs to their highest level since 1998. The Budget will take place on 26 November.
“Britain’s economy isn’t broken, but I know it’s not working well enough for working people,” Reeves said in a video message posted this morning (3 September).
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Much of the scrutiny faced by Reeves this week was prompted by a Downing Street reshuffle, with Keir Starmer moving Darren Jones – the former chief secretary to the Treasury – over to his Number 10 team.
Critics say it is evidence of Reeves being sidelined as Number 10 builds up an economic base of its own – something Reeves’s team denies. The reshuffle doesn’t appear to have settled investors, who have been selling UK government bonds and pushing yields up.
Back in the spring, Reeves had a £9.9 billion fiscal buffer, but research firm Pantheon Macroeconomics thinks this has now morphed into a £20 billion “black hole”. Rising gilt yields push up the cost of government borrowing, thereby eroding Reeves’s headroom.
“The markets are making their view brutally clear,” said Nigel Green, chief executive of the deVere Group, a financial services company. “Reeves will have no choice but to deliver tough measures – either tax rises, spending cuts, or both – if she wants to prove that Britain’s debt can fall in line with her fiscal rules.”
Speculation has been ramping up, with rumoured property taxes a particular focus in recent weeks. Stamp duty reforms, a so-called mansion tax, and the introduction of National Insurance for landlords are all reportedly up for discussion.
Spending cuts could be another option as the chancellor looks to balance the books, but previous attempts have largely been thwarted.
Benefit cuts were watered down earlier this year after rebel MPs threatened to block a Commons vote. The chancellor also announced a major U-turn on Winter Fuel Payments, reinstating them for nine million pensioners in England and Wales following significant backlash.
The problem with tax hikes
The problem the government faces is that the tax burden is already at a record level. Personal tax thresholds have been frozen since 2021, and inflation has been high. This means many find themselves in a higher tax bracket thanks to fiscal drag alone.
Labour’s general election manifesto promised not to raise income tax, employees' National Insurance or VAT, but a challenging fiscal backdrop meant Reeves had to look for other ways to balance the books last October.
The 2024 Autumn Budget put the burden on businesses. Tax hikes worth £40 billion were announced overall, with the majority being funded through an increase to employers’ National Insurance contributions.
We are now starting to see the economic impact. Survey data from the Office for National Statistics (ONS) suggests some firms are not recruiting new workers or replacing those who have left. Businesses warned this would be a consequence of higher payroll taxes.
Taxes on wealth were another focus last autumn, with policies on capital gains tax (CGT), inheritance tax (IHT) and pensions being announced. Reports suggest this may be prompting some wealthy individuals to leave the UK for more tax-efficient shores.
Was the government right to rule out the three big taxes?
The problem with leaving the three main taxes untouched is that they are the government’s biggest revenue raisers. In the 2024/25 tax year, income tax accounted for 35% of the total tax take, VAT accounted for around 20%, and employee National Insurance contributions accounted for around 6%.
Modelling from HMRC shows that hiking one of these taxes could raise billions:
- Basic-rate income tax: Adding 1p to the basic rate could raise £6.9 billion more in 2026/27, £8.25 billion more in 2027/28 and £8.2 billion more in 2028/29.
- Higher-rate income tax: Adding 1p to the higher rate could raise £1.6 billion more in 2026/27, £2.15 billion in 2027/28 and £2.1 billion in 2028/29.
- Class 1 National Insurance: Raising the main rate of Class 1 National Insurance for employees by 1p could raise £5.35 billion in 2026/27, £5.3 billion in 2027/28 and £5.4 billion in 2028/29.
- VAT: Raising the standard rate of VAT by one percentage point could raise £8.8 billion in 2026/27, £9.2 billion in 2027/28 and £9.55 billion in 2028/29.
Meanwhile, changing the rates on things like IHT and CGT is less effective, as these represent a far smaller proportion of total tax revenues – 1% and 1.5% respectively last year.
“Politically, it would be incredibly difficult [to touch the three main taxes], because Labour pledged to leave these alone in its election manifesto and has repeatedly said it won’t raise taxes for working people. However, these figures show just how much money this could raise,” said Sarah Coles, head of personal finance at Hargreaves Lansdown.
“In an environment where there are no great and popular choices, the government will need to find the ‘least worst’ options, so we need to consider the potential impact of these changes.”
Which taxes could go up?
If the government sticks to its promise not to raise the three main working taxes, Reeves will need to look for other areas that remain untapped. We take a closer look at some areas the chancellor might consider.
1. Extending the tax threshold freeze
The chancellor could go back on her decision to end the freeze on personal tax thresholds, for example by extending the deadline from 2028 to 2030. Speculation has been rising in this area.
“It’s politically useful because it increases the tax take, without actually being a tax rise,” said Coles. “The problem is that this will raise money in future years – beyond 2028 – so won’t help in balancing the books in the interim.”
Furthermore, some might see it as a broken manifesto promise, given the government promised not to hike income tax when seeking election.
Calculations from Rathbones show extending the freeze to 2030 could mean high earners find themselves paying thousands more in income tax compared to 2022, when thresholds were first frozen.
Someone who earned £100,000 in 2022 could pay £7,000 more in tax than if thresholds had kept pace with inflation. The additional tax burden would be £5,600 for someone on £80,000, and £4,600 for someone on £50,000.
The figures assume wage growth in line with the Office for Budget Responsibility’s data and forecasts, and 2% inflation in 2030.
2. Salary sacrifice
Salary sacrifice arrangements have been another area of speculation.
Under current rules, employees can give up a slice of their pay in exchange for a benefit, such as a pension contribution. It is a tax-efficient arrangement, because it means you pay less income tax, and both you and your employer pay less National Insurance.
In May, an HMRC report was published looking into the possible outcome of changing the rules. The report was commissioned by the previous government in 2023, but it has raised fears that existing tax reliefs could be scaled back.
“It’s not the first time that salary sacrifice has come under the spotlight as a potential area for shoring up the tax take, and given the pressures on the public purse, it would be surprising if no one in government was looking at this report,” said Gary Smith, financial planning partner at Evelyn Partners.
3. Pensions
A significant tax hit is already looming for pensions, which will be brought inside the IHT net from April 2027. Reeves may be reluctant to hammer them with further changes as a result, particularly given that the government wants to use pension assets as an engine for growth.
That said, every time money needs to be raised, there is speculation about whether the government will trim pension tax relief or pension tax-free cash.
Some have previously suggested introducing a flat rate of pension tax relief so that all taxpayers get the same. It is currently received at your marginal rate.
This would be difficult to implement from an operational perspective, particularly for those in ‘net pay’ schemes where your pension contribution is taken from your pre-tax pay. To claw the money back, HMRC would effectively need to apply a separate tax charge.
Scrapping or reducing the tax-free cash allowance would also be a risky move, given that this benefit is popular and widely understood. The Telegraph recently said Reeves was considering the measure as part of an extensive list of money-raising proposals, but its report also cited a Whitehall official who reportedly called reforms “unlikely”.
4. Investments
Reeves hiked CGT rates at the last Budget, but that doesn’t mean they won’t be in focus this time around.
A report in The Guardian claimed the Treasury is considering increasing rates by “a few percentage points”. This would supposedly be accompanied by some kind of CGT allowance for investors who put money into British businesses, as the government seeks to revive UK markets.
Dividends are a less likely target. “Dividend tax was mentioned in the leaked memo which Angela Rayner submitted to the Treasury in March, but this has already been squeezed significantly in recent years,” said Coles.
“The rates were hiked back in April 2022, and then the tax-free allowance was slashed from £2,000 in April 2023 to just £500 today. Given how attractive the UK market is for investors seeking dividends, it would be counterintuitive to make dividend investing less rewarding given that the government is keen to encourage investment in the UK.”
5. Inheritance tax
IHT was a significant focus last autumn, with new measures impacting farms, family businesses and pension pots. The freeze on the tax-free allowances (known as the nil-rate bands) was also extended until 2030, leaving estates exposed to fiscal drag.
Further measures could be on the cards this year. Sources told The Guardian that the Treasury is considering tightening up gifting rules. This could involve introducing a cap on the total value of lifetime gifts or changing the rules on taper relief.
Current rules allow you to give away assets in your lifetime to avoid IHT, as long as you outlive the gift by seven years. For now, there is no limit on the value of the gifts, provided this timeline is met.
Something called taper relief kicks in after three years – meaning a reduced rate of IHT is applied if the gift-giver passes away at this point. The IHT rate falls further with each year that passes after the three-year point.
For example, if someone dies three to four years after giving a gift, an IHT rate of 32% is applied (a discount on the full rate of 40%). If they pass away six to seven years after giving a gift, a rate of 8% applies.
“Introducing a lifetime cap would be a significant departure from current policy,” said Rachael Griffin, tax and financial planning expert at wealth management firm Quilter.
“The UK has never had such a limit, and if it were set too low it could affect a large number of middle-class estates, particularly in areas where property wealth alone can easily breach frozen thresholds.”
She also points out that keeping track of a lifetime cap could prove administratively complex for HMRC.
6. Property taxes
Some of the latest rumours have focused on property taxes, including the possible replacement of stamp duty with a new levy on the sale of properties worth more than £500,000.
While the exact details of what the government is considering are unclear, the rumoured policy seems to have been partly inspired by a report from the think tank Onward.
The think tank’s campaigners propose an annual rate of 0.54% for properties worth between £500,000 and £1 million, and 0.81% on values above that. While the rate proposed by Onward is annual, the amount would only be payable after a sale.
As well as looking at stamp duty, the Treasury is supposedly thinking about replacing council tax with a new local property tax in an attempt to boost struggling local authorities. Bills could be based on the value of the property, amid concerns existing council tax bands are out of date.
While stamp duty changes could theoretically be implemented fairly quickly, council tax reforms are likely to take much longer, potentially requiring Labour to win a second term in office.
Another area Reeves is said to be considering is CGT on expensive houses. Under current rules, CGT is only charged on the sale of second homes, but rumoured changes could bring first homes inside the CGT net too, if they are worth more than a certain threshold.
The Times said a theoretical threshold of £1.5 million would hit around 120,000 homeowners who are higher-rate taxpayers with CGT bills of almost £200,000.
Finally, landlords could also be in the Treasury’s line of sight. Labour insiders supposedly told The Times that officials are considering charging National Insurance on property income in the hope of raising £2 billion.
7. Wealth tax
A wealth tax is another area of speculation, but would be seen as an extreme move.
A wealth tax is effectively a levy on an individual’s total wealth rather than just their income. It could be applied as a percentage payable by individuals with assets over a certain level. Campaigners have previously suggested a 2% wealth tax for individuals with wealth over £10 million.
“It is difficult to make the case that an annual tax on wealth would be a sensible part of the tax system even in principle,” said Stuart Adam, senior economist at the Institute for Fiscal Studies. “Taxing the same wealth every year would penalise saving and investment.”
Implementing a wealth tax could also prove difficult. “It would require the government to set up a new administrative apparatus to value wealth – and valuation would be extremely difficult for some assets, such as private businesses. It is much easier to observe and tax the stream of income they generate,” Adam added.
One alternative would be to revisit existing taxes on wealth, such as CGT and IHT. In the past, rumours have focused on the potential for a ‘double death tax’ where CGT is applied on top of IHT when assets are passed on at death.
Should you act on Budget rumours?
Rumours can incite panic but it is important to stay calm and avoid knee-jerk reactions that can leave you worse off over the long run.
Last year, Reeves was widely expected to cut the amount of tax-free cash retirees could take from their pension – a rumour which prompted many to access their pension pot earlier than previously planned. The policy never materialised and some savers were left with regret. Leaving the money invested for longer could have allowed their tax-free lump sum to grow further.
Panicked reactions this time around could also have negative consequences. The property market is just one example. “The rumours around council tax and stamp duty could damage your home-buying plans and have a knock-on impact on the wider market if people make dramatic changes based on fear,” Coles said.
That said, there are some sensible steps you can take as part of your ongoing financial planning:
- Tax-efficient investing: If you want to invest and are looking to protect yourself from CGT and dividend tax, Coles says using a stocks and shares ISA is a “no-regrets move”. If you already have investments but hold them outside of an ISA, moving them inside a tax-efficient wrapper is also a good idea. This process is known as a ‘Bed and ISA’ transfer.
- Cash ISA: If you have cash savings, consider putting them in a cash ISA to avoid a tax bill on your savings interest. Basic-rate taxpayers become liable for tax as soon as they earn £1,000 in savings interest. Higher-rate taxpayers can earn just £500, and additional-rate taxpayers have no allowance at all.
- Boost your pension: Boosting your pension contributions is almost always a good idea, as a pension is one of the most tax-efficient ways to save and most people underestimate how much they will need for retirement. “The annual pension allowance is £60,000 and the fact you get tax relief at your highest marginal rate means higher earners in particular should look to take as much advantage as makes sense for their finances,” Coles said.
- Salary sacrifice: Salary sacrifice allows you to swap a portion of your salary for an equivalent benefit, such as a pension contribution, and helps both you and your employer pay less tax. It is also a good option for higher earners once they start to lose means-tested payments like Child Benefit, as it reduces your take-home pay without actually leaving you worse off overall.
- Lifetime gifts: If you are concerned about an IHT liability and are in a position to give gifts to your family, consider the most tax-efficient way to do it. To avoid paying IHT, you need to outlive the gift by seven years. Alternatively, regular gifts made out of surplus income become tax-free immediately, for example, you could contribute a regular amount to a grandchild’s junior ISA.
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Katie has a background in investment writing and is interested in everything to do with personal finance, politics, and investing. She enjoys translating complex topics into easy-to-understand stories to help people make the most of their money.
Katie believes investing shouldn’t be complicated, and that demystifying it can help normal people improve their lives.
Before joining the MoneyWeek team, Katie worked as an investment writer at Invesco, a global asset management firm. She joined the company as a graduate in 2019. While there, she wrote about the global economy, bond markets, alternative investments and UK equities.
Katie loves writing and studied English at the University of Cambridge. Outside of work, she enjoys going to the theatre, reading novels, travelling and trying new restaurants with friends.
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