Last year’s big tax-raising Autumn Budget should have been a one-off, but Autumn 2025 promises more of the same.
Rachel Reeves’ Budget premiere last October produced tax rises amounting to £41 billion a year by 2029/30, over half of which stemmed from higher employers’ national insurance contributions (NICs). In an interview following that Budget, the Chancellor said, “…there’s no need to come back with a budget like this. We’ll never need to do that again.”
Under a year later, the notion that the 2024 Budget was a one-and-done affair now looks wishful thinking. In early August 2025 the independent National Institute of Economic and Social Research (NIESR) suggested the Chancellor would need to find more than £50 billion in additional taxes and/or spending cuts to stay within her ‘cast iron’ fiscal rules.
That was much higher than other estimates, but the Prime Minister’s response was only to say that the NIESR’s numbers were “not figures that I recognise".
If tax rises are inevitable – something the Treasury does not deny – then where could the Chancellor target? Rumours are rife, but the government’s stance reiterates its manifesto promise not to increase the rates of income tax, VAT and NI (for employees, anyway). Maintaining this line is a major constraint as these are the three largest sources of tax revenue.
For instance, HMRC estimates that adding one percentage point to all income tax rates would produce over £10 billion a year, whereas doing the same for inheritance tax is worth only £0.3 billion.
Likely targets
One likely non-rate income tax increase is a two-year extension to April 2030 of the freeze on allowances and tax bands. This allows inflation to drag more people into tax and pushes existing taxpayers into higher rates. A good example is the £12,570 personal allowance, first set in 2021/22, which would now be about £15,000 without the freeze.
A cut to income tax and/or national insurance relief on pension contributions is a regular Budget candidate which, to date, has only attracted limited tweaking via the pension annual allowance. It’s a tempting target – the latest figure for the cost of relief is over £78 billion. Another frequently suggested reform is for income tax relief to be set at a flat rate – say 30% – rather than the current marginal income tax rate of up to 45% (48% in Scotland).
The Chancellor has already made clear she wants to reduce the amount that can be invested in cash ISAs (currently 100% of the maximum £20,000 subscription, itself frozen until 2030). Any restriction could have a wider impact, catching some funds currently classed as fixed interest investments within stocks and shares ISAs.
Another rise in capital gains tax rates is unlikely after last year’s changes, but there could be an increase to the tax on share dividends by, for example, raising the rates to bring them into line with other income tax rates.
Some useful pre-Budget actions could be considered after seeking advice, such as making pension contributions before the Chancellor speaks. There is also strategic planning, which normally requires personalised advice. This could involve minimising taxable income as far as practical, maximising use of independent taxation and timing income so that important thresholds (e.g. £100,000 at which the personal allowance is tapered) are only crossed every other tax year.
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