2025 Autumn Budget Predictions

Ahead of the upcoming 2025 Autumn Budget, which will take place on Wednesday 26th November 2025, we have been considering our Autumn Budget predictions and we begin by focussing on frozen tax allowances.

Frozen Tax Allowances

The current freeze on income tax allowances, as well as Inheritance Tax nil rate bands, are currently scheduled to end in April 2028.

Over time wage growth has dragged many people into the higher and additional rates of tax, allowing the so called ‘fiscal drag’ to gradually increase income tax without an increase to the headline rates of income tax.

Similarly, as property and asset values have increased over time, the freeze to the Inheritance Tax nil rate bands continues to increase the Inheritance Tax take.

Considering the government’s manifesto promises to not increase taxes for working people, an extension of the current freeze into the 2030’s seems highly likely. This change could raise billions for the exchequer without an increase to the headline rates of income tax and would not necessarily be seen to be a tax rise by many.

Property Taxes

Stamp Duty Land Tax (SDLT) is criticised for inhibiting the property market, acting as a deterrent for people to downsize and a barrier for first time buyers. There have been rumours that the government will look to replace SDLT with a ‘proportional national property tax’ for homes worth more than £500,000.

Under the current SDLT regime, buyers usually pay SDLT based on the purchase price at the point of purchase. Under the rumoured proposals, the annual tax would apply each year to the value of the property in excess of £500,000, with the onus shifting from buyers to sellers to pay the tax.

Another rumour suggests that changes to ‘principal private residence relief’ could be under consideration. As things currently stand, provided that you have occupied a property as your only or main residence, you are able to exempt the entirety of the capital gain arising on the sale without limit.

By limiting or removing principal private residence relief for sales of properties in excess of a fixed threshold (current estimates suggest between £500K and £1.5 Million), the exchequer could significantly increase the Capital Gains Tax collected from high value property sales.

Rental Income Liable To NIC

National Insurance currently applies to employees, employers, and the self-employed, but doesn’t apply to rental profits. However, the chancellor is rumoured to be considering charging national insurance on rental profits, with estimates suggesting that this could raise at least £2billion.

Whilst the transition to making tax digital would make the change relatively simple for HM Revenue and Customs to implement, it isn’t immediately clear how National Insurance will apply to rental profits. For example, will rental profits count as ‘pensionable earnings’ for pension contribution purposes, and will rental profits be aggregated with other sources of income, such as self-employment.

Inheritance Tax Gift Reliefs

Inheritance Tax reliefs as they currently stand have been in place for a number of years without significant change, so the government may take the opportunity to overhaul the available reliefs or amalgamate them into a single annual gifting limit.

Gifts in excess of your available gifting exemptions are known as ‘potentially exempt transfers’ and will not attract Inheritance Tax provided you survive the gift by more than 7-years. It has been rumoured that the government are considering increasing the so called ‘7-year clock’ to 10 or 15-years or introducing a lifetime gifting allowance in line with other European countries.

One of the most generous Inheritance Tax exemptions is the gifts out of surplus income exemption, which immediately exempts lifetime gifts from Inheritance Tax provided that certain conditions are met. The exemption currently applies without limit as surplus income varies person to person, so there are rumours that the generosity of this exemption could be reduced or removed entirely.

Pension Tax Relief Changes

The government currently spends around £50 billion per year to fund tax relief on pension contributions, so given the quantum of expenditure there is always speculation that the government will reduce the generosity of pension tax relief.

It is a careful balancing act for a government that has eroded the Inheritance Tax benefits of pensions, but which has acknowledged that collectively we aren’t saving enough for retirement. If the rumoured reduction to the rate of tax relief or introduction of a 25% flat rate of relief come to pass, it is difficult to see how this would be implemented without disincentivising individuals from saving for retirement.

There have also been rumours that the government intends to reduce, or even remove, the 25% tax-free lump sum withdrawals from pension pots, currently capped at a maximum of just under £270,000.

Capital Gains Tax

In recent years, Capital Gains Tax rates have been at historic lows, with some suggesting that they should be aligned with income tax rates as has been the case in the past. Whilst the government stopped short of aligning the rates of Capital Gains Tax with Income Tax at the last budget, they slightly increased Capital Gains Tax rates to 18% and 24% with transitional rules applying for Business Asset Disposal Relief.

If Capital Gains Tax rates are hiked significantly, there is a body of research that suggests that individuals would crystalise gains before the new rate of tax comes into force, increasing the Capital Gains Tax in the short term. However, when the new rate of tax comes in, they will simply hold any assets that have appreciated in value, and the Capital Gains Tax reduces in the long term.

Whilst the alignment of the Capital Gains Tax rates seems unlikely, a further small increase to Capital Gains Tax rates could be introduced without affecting the volume of transactions, and therefore tax take, in the long term.

Wealth Tax

There have been calls for an annual wealth tax of up to 2% on an individuals assets exceeding £10 Million, with the chancellor refusing to rule out such a levy.

Other European countries have found these types of taxes to be administratively burdensome and trigger high net worth individuals to relocate, which has ultimately led to the levy being less effective than expected.

Given the experience of our European neighbours, it seems unlikely that such as tax would be introduced, with indirect wealth taxes such as those on property mentioned above potentially being favoured.

Concluding Remarks

With the government reportedly having a £40 Billion black hole to fill, tax rises in November seem to be an inevitability.

Taking into account the package of tax rises already announced, including the changes to Agricultural/Business property relief and the Inheritance Tax treatment of pensions from April 2027, there is potential that the Autumn Budget could introduce a plethora of additional tax raising measures.

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Disclaimer - All information in this post was correct at time of writing.