Rachel Reeves delivers the Autumn Budget on Wednesday, 26 November, and this one’s shaping up to be messy.
There’s a £30-40 billion black hole in the public finances. Growth is anaemic. The fiscal buffer has vanished. And every think tank, newspaper, and financial advisor in the country is speculating about some pretty gruelling changes.
Business as usual, then?
Well, some of the speculation will be right. Most of it will be wrong. Last year, thousands of people panicked and withdrew pension lump sums based on changes that never happened.
So before you make any sudden moves, here’s what we know, what’s likely, and what’s probably just noise.
The Country’s Economy
The Office for Budget Responsibility is downgrading growth forecasts. Productivity estimates are being slashed. Interest costs are higher than expected.
The Institute for Government described Rachel Reeves as being in a “triple-bind”. Weak growth, high borrowing, and the buffer against her own fiscal rules has vanished – casualty of downgraded productivity, undelivered spending cuts, and higher funding costs than first envisaged.
Labour promised not to raise income tax, VAT, or National Insurance for “working people.”
That leaves everything else fair game: thresholds, allowances, reliefs, and creative definitions of what counts as “working.”
Inheritance Tax: More Pain Incoming?
Some changes to IHT are already confirmed.
Pensions are being brought into IHT from April 2027. Business and Agricultural Property Relief are being capped at £1m from April 2026, with only 50% relief above that threshold.
That means an effective 20% IHT rate on previously exempt assets.
Now there’s talk of more. A lifetime cap on tax-free gifts – possibly as low as £50,000 to £200,000. To put that into perspective: if a £100,000 lifetime cap were introduced and you gave away £300,000, your heirs could face an £80,000 IHT bill. Under a stricter £50,000 cap, the bill could rise to £100,000.
There’s speculation about extending the seven-year gifting rule to 10 years. Removing the CGT uplift on death, which would mean beneficiaries pay CGT on the full gain since original purchase rather than from the date of death.
Last year’s Budget saw plenty of IHT speculation that didn’t happen. Proposed changes to gifting rules and the seven-year rule were widely discussed but never materialised.
Pensions: The Perennial Target
Every Budget brings pension speculation, and this one is no different. Three main areas are under discussion.
1. The Tax-Free Lump Sum Drama
This rumour scared people last year. It’s back. Currently capped at £268,275, speculation suggests it might be reduced or capped lower.
HMRC has issued a warning: you cannot reverse a pension withdrawal. If you panic now and the change doesn’t happen, you’re stuck.
Last year saw a surge in withdrawals – £18.08 billion of tax-free lump sums was withdrawn in the 2024/25 financial year, a 61% increase on the £11.25 billion extracted the year prior. Most of those people didn’t need to do it.
2. Tax Relief on Contributions
Flat-rate relief of 20-30% for everyone is being discussed. This would save the government around £14.5 billion annually from higher-rate taxpayers but would be complex to implement.
Currently, you get relief at your marginal rate: 20% for basic-rate taxpayers, 40% for higher-rate, 45% for additional-rate. Flattening this helps the Treasury but hammers higher earners trying to save for retirement.
Some experts warn that this could spark the demise of many of the last-standing defined benefit schemes in the private sector.
3. Salary Sacrifice Under Threat
Reports suggest capping salary sacrifice at £2,000 per year, with full NI applying above that.
This would affect both employees and workplace pension schemes. One of the key benefits of salary sacrifice is that both workers and employers pay no income tax or NI on pension contributions – removing this would be significant.
The triple lock remains protected for now, despite warnings from the OBR that its cost could be three times higher than forecast.
Capital Gains Tax: How Much Higher?
CGT rates already jumped last year – 10% to 18% at the lower rate, 20% to 24% at the higher rate.
Now there’s speculation about aligning with income tax rates, potentially 40-45% for higher earners.
There’s also a possibility of restricting Business Asset Disposal Relief further or scrapping it entirely. Charging CGT on primary residence sales over £1.5m, which would particularly hit London and the South East. An “exit tax” for those leaving the UK while owning assets that have increased in value.
The annual allowance has already shrunk from £12,300 to £3,000. Could drop further, though at some point the admin cost of collecting tax on tiny gains outweighs the revenue.
There’s also discussion about removing holdover relief for gifts of business assets or gifts into trust, meaning CGT would be payable immediately rather than being deferred.
National Insurance: Expanding the Net
There’s speculation about extending NI to other income sources, such as 8% on rental income. Currently, landlords pay income tax but not NI. This would be framed as a “fairness measure” – taxing income from capital more like income from work.
Employer NI for LLP members could raise another £2bn but would create effective marginal tax rates of up to 77% for high-earning partners. This could trigger a wave of LLPs converting to companies, or large international firms relocating top partners abroad for better tax treatment.
Income Tax: The Manifesto Promise Problem
Labour said they wouldn’t raise income tax. But there’s growing speculation they might break that promise with a 2p increase – the first income tax rise in 50 years.
More likely: extending the threshold freeze beyond 2028. As wages rise but thresholds stay frozen, more income falls into higher brackets. It’s called fiscal drag, and it could raise £38bn by 2029/30. It’s politically safer than raising rates directly.
The current freeze, introduced by Jeremy Hunt in 2022, is due to be lifted in 2028. Simply extending it would pull more “Middle England” earners into higher tax brackets without technically breaking the manifesto promise.
Everything Else
ISAs and Savings
The cash ISA limit might drop from £20,000 to £4,000-£12,000, pushing people into stocks and shares.
The aim would be to encourage greater flow of savings into the stock market, particularly London-listed companies, as part of the government’s push to shift the balance from cash holdings towards equities.
VAT Changes
VAT registration threshold could fall from £90,000 to £60,000 or even £30,000, dragging over a million small businesses into VAT compliance.
There’s also talk of extending VAT to new categories or reducing zero-rated goods. For SMEs already struggling with mounting costs, a lower threshold would add a significant administrative burden and raise consumer costs.
Property Taxes
Stamp duty replacement or “mansion tax” on high-value properties keeps being mentioned. One proposal suggests removing stamp duty for buyers and introducing an annual tax for sellers – 0.54% for properties over £500,000 and 0.81% for properties over £100,000.
Business rates reform details promised at the Budget, particularly around the 2026 revaluation. Details about transitional relief to protect businesses from high bill increases will be crucial for small business owners.
What You Should Do
Nothing until the Budget. Don’t panic. Don’t make irreversible decisions based on newspaper speculation.
That said, there will be changes, so keep an eye on what might apply to you and consider getting a proper financial review after the date has passed.
We’re chartered accountants with decades of combined experience. We’ve seen plenty of Budgets, plenty of speculation, and plenty of clients making both good and bad decisions based on what they’ve read.
Tax changes create both challenges and opportunities. The challenge is understanding what’s actually changing and how it affects you specifically. The opportunity is getting your affairs in order before changes take effect.
Book a consultation now. Let’s look at your situation, identify what matters and what doesn’t, and ensure your financial situation is smart and efficient going forward.