Autumn Budget 2025 predictions

The 26th November Budget is fast approaching. Since the early Autumn, there has been significant speculation and comment from a variety of media, think tanks and “off the record” sources as to what the Government may or may not do in the Budget, driven in part by the UK’s fiscal situation and the impact of the Office for Budget Responsibility reports on the Chancellor’s spending headroom.

Here we provide an overview some of the speculation and comment. However, the danger with focusing just on the possible changes is that you can be left “snow-blind” by their sheer volume, with the result that you pass over the significant areas of the UK’s tax system where the Government has already provided clear signposting as to what it will or will not do for the benefit of business and individuals. 

Therefore, in the interests of balance, we are going to overview not only the possible areas of Budget uncertainty but also the areas where the Government has provided a clear roadmap. We will also provide some thoughts as to how businesses and individuals can best navigate and mitigate the mix of both tax-related certainty and uncertainty. For us, the key here is to be on top of the known knowns, be conscious of known unknowns and know how to answer the “so what?” question.

Let’s overview the tax-related Budget speculation

There has been a veritable smorgasbord of possible Budget-related tax measures floated by the media, think tanks and “off the record” governmental sources. Indeed, you could almost choose a tax-related measure for each letter of the alphabet!

Here’s a snapshot of some of the key areas of speculation:

1. Income tax is one of the Government’s top revenue raisers. There is talk that the Chancellor may extend the “big freeze” in income tax bands beyond 6 April 2028.
2. National Insurance is a major revenue raiser too. In the days of the May and Hammond Conservative Government there were discussions about increasing the National Insurance contributions paid by the self-employed members of professional services firms to narrow the gap between the effective rate of contributions paid by the employed and the self-employed. Apparently the then Chancellor, Mr Hammond, had difficulties with the point that the effective rate of National Insurance paid by members of self-employed professional services firms is less than that paid by employed individuals at hedge funds! Various think tanks have picked up this point and are proposing an expansion of the National Insurance base as a possible revenue raiser, and to even the playing field between self-employed professionals and the majority of the working population.
3. Continuing the National Insurance theme, there has been speculation that the Government is considering imposing National Insurance on rental income derived by individuals from real estate rents. If this goes beyond the stage of speculation, there would be a disparity between individual and corporate landlords with the latter not being subject to National Insurance.
4. Stamp Duty Land Tax (SDLT) reform on residential property is on the agenda. Concerns have been raised that SDLT creates a barrier to downsizing. Indeed, the opposition has picked up on this point and has suggested the abolition of SDLT on the purchase of primary residences.
5. There has been speculation that the Chancellor may look to lift the current EMI limit for individuals (currently set at £250,000 in any three-year period) by “a multiple” of its current level. For companies that already have EMI arrangements in place and employees operating at or near the current limit, this change could present a timely opportunity to issue a new round of grants to take advantage of the increased headroom.
6. Business rates reform is also on the cards. There are two particularly interesting areas of reform which the Government may wish to address. First, a move from a slab to a slice system where there will be different marginal rates applied to the rateable value of the property. Second, there may be targeted reliefs aimed at smaller businesses.
7. The banks are never far from the limelight (and they have their own particular technical issues around the bank levy and the bank surcharge). There has been speculation that banks could be subject to a corporation tax surcharge on the interest derived from overnight deposits with the Bank of England where the liquidity deposited with the Bank of England has been derived from the Government’s quantitative easing programme. Technical stuff!
8. There have been calls for reforms to how wealth is taxed in the UK. The calls for reform range from the introduction of a new tax on wealth as a whole (subject to a threshold) to reforms to existing taxes on wealth. On the latter point there has been speculation that the existing exemption from capital gains tax on the disposal of one’s personal residence could be restricted once a threshold has been passed. There has also been discussion that the seven-year period for making an inheritance tax-free gift to an individual could be stretched out further.
9. Before every Budget there is pensions-related tax speculation and there is no exception in the run-up to this year’s Budget. There has been discussion that the Government may wish to reduce the size of the tax-free lump sum which individuals are entitled to draw from their pensions. There has been further discussion that the Government is looking at the National Insurance advantages associated with salary sacrifice. There again, you get speculation of this type every year!
10. Gambling taxes may be on the agenda following an intervention by the former Chancellor and Prime Minister, Gordon Brown. Mr Brown has suggested increasing taxes from online casinos and from slots and gaming machines to fund the abolition of the two-child benefit cap.
11. Tariffs are a major discussion point in the world agenda at the moment. Concerns have been expressed by the US that the UK’s digital services tax has a disproportionate impact on the “Fab Five” US tech companies and there have been rumours that this tax will be reformed as part of the trade negotiations between the US and the UK.

Let’s not forget the areas where UK tax policy provides a clear roadmap

In the run-up to the Autumn Budget, it is all too easy to focus exclusively on the uncertainties and to forget that the UK’s economy is the sixth largest in the world and the second largest in Europe. Part of the UK’s success has been created by a clear and coherent tax policy that creates outstanding opportunities in many respects. We wish to highlight some of the opportunities created by the UK’s tax policy so that taxpayers can benefit from them.

1. The UK’s Treasury has published a Corporate Tax Roadmap which is designed to keep the UK competitive and to support investment throughout the life of this Parliament. The roadmap makes a commitment to maintain a 25% corporation tax rate, to continue full expensing of capital allowances for certain types of plant and machinery, and to maintain the £1m annual investment allowance, capital allowances, the structures and buildings allowance and R&D tax credits. These are generous reliefs which are designed to support UK enterprise.
2. To attract talent and wealth into the UK, the Government has introduced the foreign income and gains regime with effect from 6th April 2025. In outline, if an individual has been a non-UK resident for 10 tax years before becoming a UK tax resident, then the individual will enjoy an exemption from UK tax on foreign income and capital gains (and on certain types of employment income) not only for that tax year in which they become a UK resident but also for the following three tax years. Therefore, individuals who are currently non-UK residents may wish to become UK tax residents to make use of these rules to realise non-UK capital gains and non-UK income on a tax favourable basis (assuming that they are no longer taxed in their current jurisdiction).
3. As part of the Corporate Tax Roadmap, the Government has issued draft legislation to reform the UK’s transfer pricing rules. The changes are due to take effect on 1 April 2026 for corporates. In addition to the changes of a technical nature, two changes have been announced which are likely to have a significant impact on business. First, the UK’s current exemption from transfer pricing for SMEs is to be reformed so that medium-sized enterprises will be brought within the transfer pricing rules. Medium-sized enterprises should now be considering their transfer pricing policies and the associated documentation to determine if they meet the arm’s length standard. Further, the Government has proposed that an international controlled transactions schedule should be introduced under which certain transactions will be reported directly to HMRC. Businesses should ensure that they have the systems in place to handle this type of reporting. Second, the scope of UK transfer pricing is to be reformed so that it will no longer apply in the UK-to-UK intra-group context, subject to certain exemptions. This reform may simplify the implementation of intra-group reorganisations where transfer pricing risks can be a compliance issue under current rules.
4. The Government has also introduced draft legislation governing the taxation of umbrella companies. The legislation is slated to take effect on 1 April 2026. Very broadly, an umbrella company is a company which supplies its employees to a client company. In summary, if the umbrella company defaults on its PAYE and NIC obligations, the client company which is buying in the labour can be held to be jointly and severally liable for the unpaid tax. Client companies which are buying in labour need to review their supply chains to guard against these risks.
5. There have already been significant pre-announcements on the taxation of wealth. Last year’s Budget increased the favourable capital gains tax rate for business assets from 10% to 14% with a further increase to 18% slated to take effect from 6th April 2026. The tax tail should never drive the commercial dog. However, business sellers should be aware of this rate increase when they set the timetable for their business/company sales. What difference does a day make? Well, the answer here is 4%! 
6. Continuing with the taxation of wealth, the preannounced reforms to inheritance tax and their impact on the farming and business sectors have been heavily debated by commentators: essentially the plan is for 100% business asset relief to be restricted to a £1m allowance with the excess attracting relief at the 50% rate. Placing the assets into a family trust structure might be the answer for some, as the inheritance tax rate on trusts is calculated by reference to a 6% ten-year charge on which business property relief will be available subject to the limits discussed above. For others, the making of lifetime gifts may be an effective strategy.

It is important for taxpayers to use the time before the 6th April 2026 implementation date to plan for these changes.

So how should I approach the Budget?

Each of us is unique and we all handle risk and change in different ways. One of the purposes of this piece is to remind readers that, although there is plenty of speculation out there, when you look at the situation in the round, there is much which is certain and positive about the UK’s tax policy.

However, we have decided to end by focusing on the timing of Budget Day measures.

Clearly some measures which are announced on Budget Day take effect from Budget Day. Here are two examples from recent history. When he was Chancellor, Rishi Sunak replaced the £10m entrepreneurs’ relief threshold with the £1m business asset disposal relief threshold. Last year Ms Reeves did the same, increasing the capital gains tax rate from 20% to 24% with effect from Budget Day (along with a cut in the rates for capital gains on residential property from 28% to 24%). The Budget is late this year; indeed it is just one month before Christmas. If one has concerns and sensitivities about tax rate increases the best advice is to sit down with advisers with the view to making a pre-Christmas transaction a pre-Budget transaction. Now is a good time to talk through your situation (as noted, each of us is unique) and work out a plan.

However, it is well worth noting that many of the measures which are announced at the Budget don’t take effect on the Budget Day, but take effect from when the following year’s Finance Act becomes law or indeed in the Finance Act after that. (For example, the transfer pricing measures discussed above were contemplated by the last government.) Clients can make good use of these time lags. They can use the time to structure transactions accordingly. 

Budget announcements are often accompanied by a request for taxpayer consultation. Taxpayers can engage with these consultation processes so that they become part of the law-making process with a view to constructing a tax policy that works for them. If you would like help directing your comments in conjunction with or through a professional body like the Chartered Institute of Taxation, we can help.