Here, we explore what might be on the Chancellor’s radar – though it is worth emphasising that, for now, these remain just speculation rather than confirmed policy changes. We also have a Budget media feed below with the latest press snippets covering Budget news.
The economic backdrop
Rachel Reeves’ first Budget in October 2024 introduced a record £40 billion in tax rises. At the time, she indicated that such measures would not be repeated in 2025.
However, the economic landscape has continued to deteriorate. With UK growth sluggish, the global economy still fragile, and a fiscal gap now approaching £50 billion, the pressure to increase government revenue is mounting. While headline-grabbing tax rate hikes may be avoided, the focus is likely to shift toward more subtle, less visible tax increases.
Income tax threshold freeze extended?
A strong candidate for inclusion in the Budget is a further extension of the freeze on Income Tax thresholds. As wages rise but thresholds remain static, more people are pulled into higher tax bands—a phenomenon known as “fiscal drag.”
- For example, someone earning £100,000 could pay an additional £7,000 in tax if the freeze continues.
- Those earning £80,000 may see a £5,635 rise.
- At £50,000, the extra burden could be around £4,632.
Extending the current freeze, which is due to end in 2028, could bring an additional 1.4 million people into the top tax bracket (earning over £125,140).
Capital Gains Tax (CGT): Further reform?
Capital Gains Tax is likely to come under further scrutiny. In the last Budget, the Chancellor increased the lower rate from 10% to 18% and the higher rate from 20% to 24%.
Possible next steps could include:
- Raising CGT rates again,
- Applying differentiated rates to specific asset classes (e.g. second homes), or
- Further reducing the annual exemption allowance (currently £3,000, down from £12,300 in 2022/23).
While the allowance has already been cut significantly, further reductions could be seen as a relatively low-risk revenue raiser.
Inheritance Tax (IHT): A controversial target
IHT remains a politically charged issue. Recent reforms have already announced that private pension pots will be subject to 40% IHT from April 2027, along with reduced reliefs for farmers and business owners.
Further potential measures include:
- A lifetime cap on tax-free gifts passed on before death, or
- Tightened asset reliefs.
A cap on lifetime gifting would be especially controversial, possibly limiting the ability of families to support younger generations with education or housing. Administering such a system could also pose logistical challenges for HMRC, given the need for decades-long gift-tracking.
Those potentially affected may want to review their estate planning strategies and gifting plans ahead of the Budget.
Property taxes: A structural shake-up?
There is mounting speculation about a broader overhaul of property taxation. Options reportedly under consideration include:
- Replacing stamp duty and council tax with a new annual levy based on property value,
- Introducing new, higher council tax bands to capture more from high-value properties, or
- Removing the current CGT exemption for primary residences sold above a certain threshold (e.g., £1.5 million).
Any of these changes would mark a significant policy shift and could disproportionately affect homeowners in high-value regions such as London and the South East.
ISAs under review
As part of a broader savings reform review announced in the Spring Statement, there is speculation that the annual ISA allowance—currently £20,000—could be cut, particularly for cash ISAs.
Though politically unpopular, reducing ISA limits may be seen as an easy way to tighten tax relief without a direct rate increase.
Corporation tax: Changes still possible
Despite assurances that there will be no further rise in Corporation Tax, the Chancellor may still consider:
- Tweaks to employer National Insurance contributions, or
- Sector-specific changes, particularly for industries lobbying for relief, such as hospitality.
Trade bodies such as UKHospitality have argued strongly against the impact of the Employer’s NI hike implemented in April 2025.
Salary sacrifice under pressure
Salary sacrifice arrangements – where employees trade part of their gross salary for tax-free benefits (such as pension contributions, childcare vouchers, company cars, cycles to work and gym memberships) have gained popularity, especially after the April 2025 Employer NI increase.
However, changes may be coming. The government could:
- Cap the amount that can be sacrificed (impacting higher earners), or
- Remove the National Insurance (and possibly income tax) exemptions entirely.
Any move to curb salary sacrifice would likely affect both employees and employers, particularly in sectors relying heavily on such schemes for pension contributions and benefits.
Final thoughts
With a widening fiscal gap and economic uncertainty, the Chancellor faces a difficult balancing act. While outright tax rate hikes may be avoided to preserve voter support, more technical and less visible changes could still raise significant revenue without the headlines.
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Budget media feed
Here is our round up of the Budget news in the press.
Pensions raid not off the table
Torsten Bell, the pensions minister, has not dismissed the possibility of pension cuts in the upcoming Budget. He described last year’s tax increases as “difficult but fair choices” necessary to address the economic “doom loop.” While he refrained from commenting on specific Budget plans, he acknowledged the need for more funding for public services. Bell, who recently took charge of Budget preparations for Rachel Reeves, has previously advocated for reforms, including reducing the tax-free lump sum. Source: 11/09/25, The Daily Telegraph.
Big retailers at risk from tax changes
Hundreds of large UK retailers could face closure under government plans to introduce a higher business rates band for properties valued above £500,000, the British Retail Consortium (BRC) has warned. The group said around 400 supermarkets and department stores are at risk, threatening 100,000 jobs and £100m in lost local revenue. The BRC argued these stores already pay a disproportionate share of rates and face mounting cost pressures. However, the Federation of Small Businesses countered that larger firms should contribute more to help struggling smaller companies. The Government said reforms aim to reduce “cliff edges” and create permanently lower rates for retail, hospitality, and leisure, with further measures to be detailed in November’s budget. Critics argue the system is outdated, penalising physical retailers compared to online competitors. Source: 11/09/25, The Times.
Chancellor concedes tax hikes may hinder growth
Rachel Reeves has acknowledged that tax increases could negatively affect economic growth while addressing the British Private Equity and Venture Capital Association summit. The Chancellor said: “I do recognise that tax policy does impact economic growth. One of the reasons why I spoke about the need for spending restraint at Cabinet yesterday is that I recognise [that] to make sure that the numbers add up it’s not just what you bring in, it’s also what you’re spending. But crucial for all of this is economic growth. If you can grow the economy, you can make these decisions around tax and spend so much easier.” The Chancellor’s comments come after the head of the Confederation of British Industry (CBI) called on her to ditch Labour’s manifesto commitment not to hike taxes on working people. Commenting on the move, Matthew Lesh in the Telegraph said the argument was “self-serving yet understandable” but the approach from the CBI “is strategically short-sighted and economically misconceived” as it would simply feed into Britain’s economic doom-loop. Source: 10/09/25, The Daily Telegraph, City AM, The I, The Independent UK.
Tax raid on partnerships could raise £2bn
Chancellor Rachel Reeves is reportedly considering a plan to impose National Insurance (NI) on partnerships, potentially raising nearly £2bn annually. This plan, presented by the Centre for the Analysis of Taxation (Centax), could have an impact on 190,000 professionals, including GPs, lawyers and solicitors, accountants and financial advisers. The report suggests that 98% of the revenue would come from the top 10% of earners. CenTax described the fact that companies pay NI while partnerships do not as “a particularly conspicuous anomaly” in the tax system, adding: “Partnerships face significantly lower effective tax rates on their labour costs than companies, for no good reason.” The report argues: “The tax privilege offered to partnerships results in economic distortions that are bad for productivity and growth.” Source: 06/09/25, The Sunday Telegraph.
Pension withdrawals surge amid tax concerns
The amount withdrawn from UK pensions increased by more than 60% in the 2024/25 financial year, climbing to £18.1bn from £11.25bn the year before. The number of savers taking 25% tax free cash jumped by 33% to 111,869, according to figures from the Financial Conduct Authority. This comes after ministers announced that pensions would be subjected to inheritance tax by April 2027. In the six months to the end of March, £10.43bn was withdrawn by pension savers, marking a 36.5% increase on the six months before the tax plans were set out in the Budget. It has been suggested that the Chancellor may reduce the size of the tax-free lump sum as part of efforts to tackle a black hole in public finances. Source: 05/09/25, Financial Times, The Daily Telegraph, City AM, Daily Mail.
Taxes on homeowners could hit downsizers
Downsizers could face a heavier tax burden after the Budget, with the Chancellor reportedly considering new taxes on sellers of homes worth more than £500,000. The move may replace the current stamp duty system, and could be accompanied by capital gains tax on primary residences over £1.5m. Industry experts warn such measures would hit older homeowners hardest, particularly those whose properties have appreciated significantly over decades, and may discourage them from moving. This could have a knock-on effect on the wider housing market, with downsizers accounting for around 40% of property sales last year. Source: 04/09/25, The Daily Telegraph
Oscar heads our tax department and provides advice on tax structuring, planning and compliance services to entrepreneurs and their businesses.
