Autumn budget 2025
Chancellor Rachel Reeves’ 2025 autumn budget is one of the most highly anticipated in recent years. The Chancellor faces the challenge of balancing promises on tax with the need to boost growth.
Reeves has initially promised not to make significant changes to National Insurance, Income Tax, VAT, or the main rate of corporation tax therefore, speculation has been surrounding how the Chancellor will think outside the box in order to uphold her promises of growth. These four taxes account for the bulk of government revenues therefore, any meaningful change will likely need to focus on adjustments at the margins.
This could involve revising allowances, limiting reliefs, and introducing indirect measures that have the potential to broaden tax bases and tax legislation.
However, in her recent scene-setter speech on 4 November, Reeves indicated that she is likely to backtrack on previous promises. She emphasised that national interest - specifically, addressing the fiscal shortfall - would take precedence over political expediency. While discussions with the Prime Minister continue as to whether a series of smaller tax changes will suffice, Reeves made it clear when asked about breaking Labour’s manifesto: "We have got to do the right thing." This statement inferred that filling the fiscal gap would take priority, even if it means breaking from party promises, including the potential for raising income tax.
This article explores recurring speculative themes currently under discussion; however, the certainty of these changes will only be known once they are officially announced on 26 November.
Against a backdrop of international challenges, persistent pressure on inflation and flat growth, Reeves’ team must find ways to signal credibility to the markets while avoiding measures that risk stalling growth.
Key areas of speculation
National insurance
One major change on the horizon is the introduction of National Insurance contributions for Limited Liability Partnerships (LLPs), which would drastically push up marginal tax rates for partners. Reeves predicts there is potential for this to generate nearly £2bn annually. However, it may also trigger a wave of consequences. One change we may see is a potential surge of LLPs converting to companies. Additionally, LLPs with head offices based in America, particularly large international firms with a presence in the UK, may stand to benefit from this change as there remains some uncertainty as to whether LLPs with head offices located outside the UK will also be affected. Mid-market and smaller firms already struggling with mounting costs, could be hit hardest. Meanwhile, larger firms may see their top partners leaving the UK for better tax incentives, adding to the mass exodus currently affecting the UK.
What this means for you: You’re likely to see lower take‑home pay and tighter firm cash flows, prompting a rethink of drawings, profit shares, and whether a different type of legal entity or relocation makes sense.
Income tax
Speculation that Reeves will make changes rises as many predict that it is the only way to plug the fiscal black hole. One notable change being talked about in the media is an increase in the basic rate of income tax from 20% to 21% or 22%. The media estimates this change could generate up to £8bn annually. However, given the initial promise not to adjust Income Tax, it is likely that this change may face some resistance.
Regardless of whether Income Tax is directly touched, threshold freezes are likely to persist, creating the so-called “fiscal drag” effect, as wage growth pushes more earners into higher bands. For employers, this could continue to add pressure on increased wage negotiations and pension contribution costs.
What this means for you: Your overall tax bill may rise and more income could fall into higher bands, increasing wage pressure, pension costs and the value of salary sacrifice planning.
Capital gains tax (CGT) and business asset disposal relief
There has been continued speculation that CGT rates might be aligned more closely with income tax bands, however, major reform seems unlikely in the short term. The government have shown their propensity to increase the rate, as shown by the 2024 Autumn Budget. However, due to Labour's persistent comments to not raise Income Tax, VAT or national Insurance; this change has less chance of being implemented. More likely is a recalibration of Business Asset Disposal Relief, currently at 14% for gains up to £1 million. There is speculation that a reduction or restriction of this relief could be integrated into Reeves' plans thus, materially affecting succession planning for family businesses.
What this means for you: Net proceeds on exits and successions could fall, making consideration mix and pre sale structuring more important.
Property taxes
Property remains a likely area for reform. Current discussion centres around replacing Stamp Duty Land Tax (SDLT) with a recurring annual property tax, potentially targeted at homes valued over £500,000. At the same time, council tax revaluation could be revived to reflect modern property values.
A more radical proposal still under consideration is the extension of National Insurance contributions to include rental income. This could possibly involve a proposed rate of 8%, marking a notable shift for landlords and property investors.
There has been a lot of noise surrounding the idea of council tax reform from both tax professionals and the media. One notable speculated change is to create new council tax bands for more expensive homes therefore, increasing council tax for higher earners. There has also been speculation that Reeves’ broader strategy to target higher-income earners may include a rumoured introduction of a "mansion tax", that would impose an additional levy on properties valued over £2 million.
What this means for you: Expect higher ongoing property costs and lower rental yields, influencing hold/sell decisions, ownership structures and pricing for landlords and higher value homes.
Inheritance tax (IHT)
During last year's budget, we saw Reeves face pressure to modernise the IHT framework. This year, we are continuing to see the same pressures being echoed. The IHT framework is often criticised for its complexity and liquidity challenges, particularly for estates tied up in trusts or family investment companies. The current IHT charge on estates, which can be up to 40%, can create liquidity challenges for inheritors, particularly where businesses are held in family trusts or investment companies.
This can be especially difficult in unforeseen events, such as a sudden death. Recent cases have highlighted how these governance issues can complicate timely access to liquidity and make meeting tax obligations more challenging. These structures often require the approval of other stakeholders, board members, or trustees to raise funds to pay the tax. Thus, the framework surrounding this niche could be altered.
Tax professionals also note other possible reforms including: Greater exposure on lifetime gifts and business/farming assets increases the need for liquidity planning, insurance, and tighter governance across wills, trusts and company documents.
Extending the seven-year gifting rule to ten years. Currently, the seven-year rule means that no inheritance tax is due on gifts made during your lifetime if you survive for seven years after making them, unless the gift is part of a trust. Tax professionals suggest that reform of this rule, extending the period to ten years, is a likely possibility.
Adjusting or abolishing tapering relief. The seven-year gifting rule currently includes tapering relief, which reduces the percentage of IHT payable for each year that passes within the seven-year period. However, there is speculation that this rule may be reformed, potentially by replacing the tapering relief with a flat IHT rate for the full seven years, or by adjusting the relief to gradually decrease at a lower rate year by year.
Revisiting the treatment of business and agricultural property reliefs. Last year, significant reforms were introduced for farmers, which resulted in inheritance tax being applied to their estates. Tax professionals have observed that these changes have been poorly received and have had significant impacts on farmers, while generating minimal economic growth in return.
These measures could have far-reaching implications for high-net-worth families, farming estates, and business owners.
What this means for you: IHT on unused pensions and tighter ISA headroom may change the optimal order for saving and withdrawals, requiring a rethink of how you manage your wealth.
Pensions & ISA's
A major change announced in the 2024 Budget, due to take effect in April 2027, is the removal of the Inheritance Tax exemption for unused pensions. This will make beneficiaries liable for IHT on inherited pension pots.
To avoid unsettling savers, Reeves is expected to leave the £60,000 annual pension allowance unchanged. Speculation around reducing the 25% tax-free lump sum has not yet translated into policy.
However, refinements to higher-rate pension tax relief and further incentives to encourage green and productive investment through pension schemes may still emerge.
There has been speculation that Reeves intends to revive her cash ISA limit plans. Rumours indicate that the personal cash ISA limit, currently at £20,000, could be reduced. One speculated reduction is a 50% cut in the personal cash ISA limit, resulting in a £10,000 limit.
What this means for you: IHT on unused pensions and tighter ISA headroom may change the optimal order for saving and withdrawals, requiring a rebalance across tax wrappers.
Education sector
Reeves is unlikely to announce any further taxes for independent schools but may tighten existing measures introduced in the 2024 Budget. The most probable changes are further restrictions on fees-in-advance schemes, along with additional HMRC guidance clarifying how VAT applies to boarding, connected services, and partial exemption rules. Overall, the focus is expected to be on enforcement, clarification, and closing loopholes, rather than introducing fresh tax burdens.
Charities sector
Charitable organisations may see indirect impacts from the tightening of reliefs and exemptions, particularly if fiscal drag affects donor income. Trustees should also note the potential implications of IHT and CGT adjustments for legacy giving and philanthropic donations, as well as renewed scrutiny of charitable property relief amid discussions on property tax reform.
In summary, the current trajectory appears to focus on broadening the tax base and tightening reliefs, rather than increasing tax rates. Strategic preparation and scenario planning will be key to staying ahead . These proposals are not certain, and we will be updating further once more information comes to light.