What to expect from the Autumn Budget 2025

Although it would increase economic activity, lead to job creation and, from past experience, lead to an uptick in tax revenues, the Government will feel that this is not a move that will fly with their backbenchers. 

While raising corporation tax could generate billions in short-term revenue, it is not a price worth paying given the damage it would do to business confidence and would be at the cost of slowing business investment - crucial for long-term economic growth.

Although this would be far more palatable with Labour backbenchers there is little or no evidence that a wealth tax, unless in extreme situations like Covid, is an effective way of raising revenues. Only three European countries levy a net wealth tax—Norway, Spain, and Switzerland. France, Italy, Belgium, and the Netherlands levy wealth taxes on selected assets but not on an individual’s net wealth per se.  

This would raise an additional £5.8 bn by 2029-30 if introduced but it could backfire, as it would particularly affect poorer households and be at odds with the manifesto pledge not to raise taxes on working people, and for boosting UK living standards.

This would raise approximately £10bn per year, but again, could be seen as breaching the manifesto pledge not to raise taxes on working people.  

This has been suggested by a think tank and could raise £6bn, but it will hit those who do not pay employee NICs – including pensioners, landlords and the self-employed. 

The big one that could help fill the gap. Lowering the rate of tax relief on pension contributions could raise as much as £15 billion. That said, tax relief must still be offered to incentivise pension saving and because pensions are taxable. What has been suggested in the past is a flat rate relief above the 20% basic rate but well below 45%.  The majority of tax relief on pension contributions goes to higher and additional rate taxpayers. The table below shows the estimated impact of suggested flat rates of relief. 
 

However, introducing a flat rate of relief for pension contributions would be incredibly complex, especially for public sector defined benefit schemes, and this complexity is why it has not already been done. 

In July, the OBR said the triple lock would cost £15.5bn a year by 2030. This is unsustainable, and the Government would be sensible to bite the political bullet and axe it. We believe an inflation-only uprating system could be justified with minimal political fall-out. Or the state pension age could be raised again. And encourage a long-term shift from public to private retirement funding.

Mooted earlier in the year, if the Chancellor could cut the current allowance from £20,000 to £10,000 it would raise something in the region of £250-500m annually.  It would be impossible to raise billions in the short term without retrospectively capping the total ISA pot that can receive tax relief, so we think unlikely.

We could see council tax and Stamp Duty being replaced by a proportional property tax which would see homeowners - not tenants - paying a tax toward local services on house values below £500,000 and a national levy on the value above.

Could spreading stamp duty payments across several years jump start the property market? Professor Joe Nellis thinks so: “Breaking stamp duty into instalments would lower the cash needed at the point of purchase, unlocking capital and giving buyers more breathing room for deposits, moving costs, and renovations.”

Raising taxes on all of these easy targets would be popular with the Labour left. Either a levy on their profits or increased VAT on day-to-day activities. An increase in the rate of remote gaming duty from 21% to 50% could raise £1.6bn per year.

The Government are keeping the bank tax regime (i.e. the Bank Levy and the Bank Corporation Tax Surcharge) under review. What could this mean? One recent piece of research suggested a 38% per cent levy on banks, in line with the government’s energy profits tax, would raise up to £11.3bn.

Annual UK VAT receipts in 23/24 were £178.5bn. By simply raising the headline rate of VAT to 21%, this could raise additional revenue of over £8bn per year.

One of the ‘Brexit benefits’ is that a UK government can now tinker with our VAT rate at will. Having changed the rules on private schools what else could they target? Two of the most notable VAT reliefs are the sale of food and the sale of children’s clothes. If a reduced rate of 5% VAT were applied in both cases, this could raise over £6bn per year.

A similarly targeted change as suggested by Labour grandees on the grounds that the state provides free healthcare. The latest HMRC data suggests the removal of the exemption may raise £1.5bn per year.

It’s not all VAT increases. There have been suggestions that the government is considering scrapping VAT on domestic fuel bills from the current 5% to zero.

The IPT brings in a significant amount of money in taxes already at over £9bn a year and rising. By contrast alcohol duties are only modestly higher £12.8bn. A 1% increase in IPT to 13% would bring in £775m. Or an increase to 20% to align with VAT, it would be an additional £6.2bn.

The Government is already reviewing long-standing VAT exemptions for financial services, with fresh proposals that could see VAT applied to banks’ fee-based income, such as advisory, account and arrangement fees. HMRC have already said that the cost of the VAT exemption on financial services is £15.4bn per year.

The current rate of CGT is generally considered to be around the optimal rate for revenue collection, and any increase would raise significant concerns about the behavioural impact it would have, potentially reducing activity and in turn reducing tax revenues.