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This year’s Budget will take place on 26 November 2025, with many people fearful that we could see further tax hikes to help plug the black hole in the government’s finances.
Last year’s Budget unveiled a range of tax rises, with Capital Gains Tax, Inheritance Tax and employers’ National Insurance Contributions all in the firing line. However, with a vast £51 billion shortfall to fill at this year’s Autumn Budget, many expect there’s more pain to come.
Unsurprisingly, the Chancellor has sought to assuage these concerns. Confirming this year’s Budget date in a video message, Rachel Reeves said: “Britain’s economy isn’t broken. But I know it’s not working well enough for working people. Bills are high. Getting ahead feels tougher. You put more in, get less out. That has to change.”
Here, we look at some of the changes she might be considering and what, if anything, you can do about them. Bear in mind however, that currently this is all just speculation and it’s important not to make any knee-jerk, irreversible decisions based on measures that may not happen.
Pension tax relief reduced
Some commentators expect pension tax relief to be a target for the Chancellor, with potential changes including a move to a flat rate of relief. However, it was widely speculated that we’d see a shake-up in last year’s Budget, yet nothing on tax relief was announced. Find out more in our article Will the Budget target pension tax relief?
Gary Smith, senior financial planning partner and retirement specialist at wealth management firm Evelyn Partners, said: “Suspicions last summer that the Chancellor was set at the 2024 Budget to cut the maximum tax-free pension cash down from the current £268,275 sparked a rush of enquiries from concerned clients, and our financial planners are experiencing something similar this summer.
“Before the last Budget, a significant number of savers above 55 years of age decided to take their tax-free lump sum. Some of those who had done so without a clear need or purpose for it scrambled in the days after the Budget to reverse their decision, with mixed results.
“In an echo of many recent Budgets, pension tax relief could come under the spotlight yet again, with recent HM Revenue and Customs figures showing very substantial amounts of income tax and National Insurance ‘sacrificed’ by the Treasury as it allows savers effectively to keep their gross income if they put it into a pension.
“We can expect a rerun of last summer’s uncertainty, unless the Treasury rules out such moves. That it hasn’t, again – despite calls from stakeholders in the financial services sector to do so – can only leave people to suspect that pensions are on the table for the Budget.”
What you can do: It’s a good idea to make the most of current generous tax reliefs while they still stand. Most UK taxpayers automatically get tax relief on pension contributions at the basic rate of tax which is 20%. So, if you wanted to add £100 to your pension, you’d only need to pay in £80, as the government would add the £20 it took in income tax. Higher-rate taxpayers who pay income tax at a rate of 40% can claim even more pension tax relief back, so paying £100 into your pension will cost you just £60. You’ll usually get 20% of this back automatically and then will have to claim the remaining 20% through your tax return or by calling HMRC.
Similarly, if you’re an additional rate taxpayer, you can claim an additional 25% on top of the usual 20%, giving you total pension tax relief of 45%, which means a £100 contribution into your pension will only set you back £55. You’re only entitled to tax relief on a certain amount of pension contributions each tax year, known as your annual allowance, which for the 2025/26 tax year is £60,000 or your annual income, whichever is lower. Find out more about tax relief and claiming higher rate tax relief in our guides How pension tax relief works and How do I reclaim higher rate pension tax relief?
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Fidelius are rated 4.7 out of 5 from over 2,600 reviews on VouchedFor, the review site for financial advisers.
Pension tax-free cash restricted
Analysis of Financial Conduct Authority (FCA) data by wealth manager Evelyn Partners shows that UK pension holders have been drawing on their 25% tax-free entitlement at an extraordinary pace, amid fears that the government could restrict the amount savers can take tax-free.
Lump-sum withdrawals climbed to unprecedented highs in the 2024/25 tax year, jumping to £18.08bn, a 60.7% increase compared with £11.25bn in 2023. Some of these withdrawals are likely to be as a result of structured financial planning, for purposes such as clearing debt, gifting to family, or forming part of a retirement income strategy.
However, the scale of the recent increase suggests many people have been motivated more by uncertainty and fear of losing the benefit, particularly in light of reports that the Treasury considered reducing the maximum tax-free cash from £268,275 to as little as £100,000.
What you can do: Taking lump sums from your pension without a clear purpose can create unintended consequences. For example, moving funds from a pension into a personal account removes them from a tax-sheltered environment, potentially exposing them to income tax, capital gains tax, or inheritance tax earlier than necessary. Read our article Should I take my pension tax-free cash before the Budget? to find out more about some of the potential downsides.
If you are considering taking a tax-free lump sum from your pension, it’s a good idea to seek professional advice first.
Emma Sterland, Chief Financial Planning Officer at Evelyn Partners, said: ‘It is impossible to give guidance to people on what to do as individual circumstances vary so greatly and we are as in the dark as anyone else on the Treasury’s plans. But a rule of thumb suggests that if you have a clear purpose for your tax-free cash and were thinking of taking it shortly anyway, then – if you believe there is a chance of it being restricted – there might not be much harm in accelerating that step by a year or two, but we would always recommend taking advice before extracting large sums.
“For instance, trusts can be a very useful tool to hold sums that aren’t immediately needed or are intended for gifting and that is certainly an area where expert advice is essential.”
Clampdown on IHT gifting rules
Beyond pensions, inheritance tax rules are another area that may come under scrutiny. According to recent reports, the government is weighing up possible reforms to inheritance tax (IHT) rules on gifts. The intention would be to restrict the ability of people to transfer wealth during their lifetime in a way that reduces both the size of their estate and the IHT due when they die.
The thresholds for IHT gift allowances have been unchanged for decades. A review could give the government scope not only to modernise and simplify the system – for instance by rolling several allowances into one annual exemption – but also to scale back or even abolish some of the more generous provisions currently in place.
One of the key reliefs is the seven-year rule, which means that gifts of any amount fall outside IHT if the giver lives for at least seven years after making them. Where the donor dies within three to seven years, tapering rules apply to reduce the tax owed.
There is also a long-standing exemption for gifts made from excess income. These are not classed as transfers of capital, and so generally sit outside the scope of IHT.
Jon Hickman, a tax partner at accountancy and business advisory firm BDO, said: “Either, or both, of these reliefs could be adapted or simply abolished – although this would likely only affect gifts made from Budget day onwards as records of past gifts would likely be patchy at best (HMRC does not require notification of gifts made in tax returns) and taxing past gifts would be retrospective taxation.
Changes to the gift reliefs and rules would not raise vast amounts in themselves, but in combination with the changes to IHT business and agricultural reliefs already due to take effect from April 2026 and pension fund from April 2027, the cumulative impact could produce a significant increase in future IHT revenues over time.
Such changes would not affect the majority of taxpayers, nor breach any manifesto commitments – but IHT policy has become a political football in recent years due to constant press coverage, so a clampdown could be risky for the government.
What you can do: If you haven’t yet used this year’s gifting allowances, you may want to utilise them before the Budget in case any changes are announced. For example, under current rules, you can give away £3,000 worth of gifts each tax year without them being added to the value of your estate.
If you don’t use this annual exemption one year, you can carry it forward to the next tax year. However, any unused allowance can only be carried forward for one year, so if you don’t use it by the end of that year, it will be gone for good. You can find out more about allowances and exemptions in our guide Which gifts are exempt from Inheritance Tax?
Changes to property taxes
Property taxes have been a hot topic in recent weeks, with rumours abounding that bricks and mortar will be targeted by the Chancellor in this year’s Budget.
Mr Hickman said: “New higher bands of Council tax and/or a house revaluation exercise and further moves on second homes could raise revenue in a targeted way, with the added political benefit that this would be carried out by local authorities and not central government.
“There have also been rumours of HM Treasury considering changes to the capital gains tax (CGT) rules for private residences. Currently, the exemption for gains on the sale of your home is not limited and can exempt all gains – although there are rules to be met to qualify. By removing the exemption where the value of the home exceeds a fixed threshold (figures between £500,000 and £1.5m are said to be under consideration), the Chancellor could significantly increase the tax collected from high-value property sales.”
There have also been reports suggesting that the government may be exploring the idea of charging landlords National Insurance (NI) on their rental profits, a move that could generate around £2 billion in extra revenue. At present, landlords already face income tax on their rental earnings, though they can offset some of their costs. For example, there is a 20% tax credit available on mortgage interest, and they are allowed to deduct certain expenses such as property maintenance, repairs, and letting agent fees.
National Insurance, however, has traditionally been linked to earnings from work rather than investment income. Employees currently pay NI on weekly earnings above £242, while the self-employed contribute once their annual profits exceed £12,570. The standard rate is 8% for employees and 6% for the self-employed, with a reduced 2% rate applying to earnings or profits over £50,270.
Introducing NI on rental income for landlords could mean a sizeable increase in their overall tax bills at a time when rising mortgage rates and tighter regulations are already eating into profits.
Sarah Coles, head of personal finance, Hargreaves Lansdown, said: “The British love affair with property could be tested to destruction. Property is already one of the least tax-efficient ways to invest, and by adding to the mountain of tax paid by landlords, it may persuade even more of them to sell up.
“Landlords already face an array of taxes. They pay extra tax when they buy the property, because there’s a surcharge on top of stamp duty. This was hiked last October from 3% to 5%. And that’s just the start of it. When an investor rents out the property, they also pay income tax on profits from rental income. They can subtract their costs and there’s 20% relief on mortgage interest, but landlords who pay higher or additional rate tax haven’t been able to claim full tax relief on their mortgage interest since 2017.
“The tax pain continues when they come to sell, because there’s capital gains tax to worry about on investment properties. The annual allowance has dropped to just £3,000, and the rate is 18% for basic rate taxpayers and 24% for higher-rate taxpayers – and if the gain pushes you over a threshold you’ll pay some of this tax at a higher rate.”
What you can do: Unfortunately, there’s very little that anyone can do about any property taxes that might be announced in this year’s Budget.
However, anyone who is currently in the process of buying or selling a property may want to aim to complete their transaction before November 26 if they believe changes could make it more expensive to do so later on.
Personal allowances frozen for longer
In her first Budget, Rachel Reeves said that Income tax and National Insurance thresholds would remain frozen until 2028, but this could be extended so that more people will end up paying more tax due to so-called ‘fiscal drag’. This is the process by which people end up paying more tax when tax rates and thresholds don’t change, as they earn more and their assets rise in value. The current tax thresholds for the 2025/26 tax year are £12,570 (basic rate), £50,270 (higher rate), and £125,140 (additional rate).
Jason Hollands, managing director at leading wealth management firm Evelyn Partners, said: “The effect over time would be massive, but people would not see an immediate impact on their payslip. However, it would not generate a quick increase in tax receipts.”
What you can do about it: If you’re married, you may be able to use the Marriage Allowance to reduce the overall amount of tax you pay by transferring up to 10% of your personal allowance to your partner.
The personal allowance (the amount you can earn in income without having to pay tax) is £12,570 in the 2025/26 tax year, which means you can transfer £1,257. This gives your partner an increased personal allowance, and reduces their tax bill. You can also backdate your claim to any tax year since April, 2017. Find out more about this allowance and whether you might be able to use it in our article Marriage Allowance explained.
Harsher Capital Gains Tax (CGT) rules
Growing numbers of people now pay Capital Gains Tax (CGT) following several changes to the annual tax-free allowance, and there are fears the Chancellor could make further changes to CGT in this year’s Budget by raising rates.
The annual tax-free allowance was cut from £12,300 in 2022/23 to £6,000 in 2023/4 and £3,000 a year in 2024/2025. In April this year, the rate on stocks and shares was raised from 10% for basic rate taxpayers to 18%, and from 20% for higher and additional rate taxpayers to 24%.
Accountancy firm BDO thinks there is a medium likelihood of a rise in rates in this year’s Budget. Mr Hickman said, “Established HMRC behavioural research shows that a steep increase in CGT rates effectively increases tax revenue in the year before introduction, because people sell early to secure the current rate of tax. However, after the introduction, the new rate reduces revenue as individuals tend to simply hold on to appreciating assets until there is a future change of policy.
A small increase in CGT rates has the same bring-forward effect, but without deterring sales activity unduly once the slightly higher rate is in place. Therefore, successive small increases in CGT rates should allow the government to collect significantly more CGT in the long run.”
What you can do: Think carefully before rushing to sell assets to take advantage of current rules, especially if you might be able to move any of them into tax-efficient individual savings accounts.
Sarah Coles, of Hargreaves Lansdown, said: “Rumours around possible changes to capital gains tax can force people to rush into selling up. The CGT take soared in the months running up to last year’s Budget, and in October, we paid 44% more than a year earlier. The tax rate on stocks and shares rose, so acting before the Budget will have benefited those with significant sums outside ISAs that they specifically needed to sell out of quickly.
“However, for those who could have realised the gain gradually and moved it into a stocks and shares ISA, there’s a risk they paid needless tax. For landlords who decided to sell up, they reacted to a tax hike that never came, and the exodus of landlords from the rental market has caused huge headaches for tenants.”
A final thought…
Whilst any panic decisions should be avoided ahead of the Budget, it’s always a good idea to review your finances and explore ways you might be able to manage your money more effectively.
Mr Hollands said: “Clearly, like this time last year, there is considerable uncertainty and speculation about tax rises ahead of the Autumn Budget. People should be careful about taking major, irreversible decisions purely on the basis of speculation, but it is wise to take sensible steps to protect your wealth such as utilising ISA and pension allowances, as well as married couples making use of interspousal transfers, while the current rules remain in place. The only near certainty in the current climate is that taxes aren’t coming down any time soon.”
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If you’re considering seeking professional financial advice on the options available to you, we’ve partnered with nationwide Chartered independent advice firm Fidelius to offer Rest Less members a free initial consultation with a qualified financial adviser. There’s no obligation, however if the adviser feels you’d benefit from paid financial advice, they’ll talk you through how that works and the charges involved.
Fidelius are rated 4.7 out of 5 from over 2,600 reviews on VouchedFor, the review site for financial advisers.
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