Predicting the 2025 Autumn Budget

The countdown is on to the Autumn Budget 2025 on 26 November 2025 and whilst nothing has been confirmed there is vast speculation as to what changes could affect taxpayers.

Some of the top headlines in the news are discussed below.

Income Tax

Despite Labour’s manifesto promise not to raise income tax rates the reports of the ever growing “black hole” which needs to be filled may well see this promise being reneged.

The basic rate of income tax is currently 20% but this could be increased to 21% or 22%.  To help shield the working people this could be countered by a further reduction in employee national insurance contributions, meaning those in employment would see less of an effect and the extra tax would be burdened by taxpayers who do not pay employee National Insurance including the self-employed, landlords and pensioners.

The dividend tax rate was increased in 2022 by 1.25% and recent years have also seen the introduction and rapid reduction of the tax-free dividend allowance from £5,000 to £500.  Increasing the tax due on dividend income seems a likely method that the Chancellor will use to increase revenue.

With the personal allowance and tax bands frozen until April 2028 the resulting fiscal drag has brought more into the higher rate and basic rate tax bands.  Whilst the current Chancellor has committed to ending the freeze in 2028 this will be an efficient method to collect additional taxes over the next few years.

Limited Liability Partnerships (LLPs)

LLPs are a business structure perceived to be used by higher earners and it is speculated that the Chancellor will target such businesses by changing the rules on how partners of LLPs pay National Insurance.

National Insurance

Unlike employees and the self-employed, landlords do not currently pay national insurance contributions on income.  Charging national insurance on such income seems like a possible way for the treasury to collect additional income without breaking any manifesto promises.

Before the previous budget it was speculated that the 25% Tax Free lump sum on pension drawdowns would be removed but the government has since dispelled this as it encourages savers to plan for their future.  On the same basis it is unlikely that the annual amount which you can invest in pensions, currently £60,000, is unlikely to decrease.

Pensions

It should be remembered that, as announced in the previous budget, from April 2027 unused pensions will be included in your estate for inheritance tax purposes to promote the drawdown and spending of pensions during retirement.

Capital Gains Tax (CGT)

The last budget saw an increase in the rate of CGT for assets which qualify for Business Asset Disposal Relief (BADR) from 10% to 18% over a 3 year period, with a £1m limit.

A major CGT reform is considered unlikely but it is believed that a Labour government could be inclined to bring CGT rates more in line with income tax rates.

Inheritance Tax (IHT)

We are already aware of the reduction of relief available to farmers and business owners from the previous budget, as well as the taxation of private pensions as mentioned previously.  Despite vigorous lobbying against these reforms, they look certain to remain.

In addition to the above the Chancellor is said to be considering increasing the time limit for the 7 year gift rule to 10 years, or putting a cap on the level of lifetime gifts that can be made to reduce the eventual IHT on death.

The nil rate band of £325,000 has been frozen since 2009 and as per the last budget is due to remain frozen until April 2030.  Could the Autumn 2025 budget also see the removal of the £175,000 residence nil rate band for properties?

VAT

Both the Chancellor and the Prime Minister have refused to rule out a possible increase in the main VAT rate.  One of Labour’s manifesto promises was not to increase the VAT rate but their recent change to the VAT treatment of private school fees has evidenced that they are not opposed to collecting additional VAT without technically breaking this promise.

Cuts to the ISA allowance

It is widely believed that the £20,000 ISA allowance will be reduced for those wanting to add to their savings.  This will reduce the amount of savings which can attract tax free interest each year.  It was originally suggested this may be cut to £4.000 but more recent reports suspect a 50% reduction to £10,000.

Mansion Tax

Reports about a new “mansion tax” suggests that homeowners could be hit by an annual charge of 1% on properties valued over £2m and/or the removal of the Capital Gains Tax  (CGT) exemption on the disposal of principal private residences by higher or additional rate taxpayers if the property is valued above £1.5m.

The Chancellor faces a difficult challenge of trying to balance the books whilst retaining favour with their electorate.  Trying to increase treasury income without breaking the party’s manifesto promises is difficult and the past budget saw this being achieved by reducing NIC for employees but passing the cost to employers, the impact of which is perhaps evidenced by the increasing unemployment numbers reported today.  Whilst the outcome of the budget is yet to be determined it seems likely that some sectors are going to feel the impact of yet more taxes and tax planning advice will be as important as ever.