Fidelity International’s Marianna Hunt looks at the options for the Chancellor against the speculation of what might be to come.
The UK’s annual Autumn Budget is one of the most significant events of the year for everyday savers and investors and now we have a date for it: 26 November.
There has already been plenty of speculation over what changes we may see in 2025.
Some are anticipating potential changes to ISA limits and pensions, while there are also rumours that the Chancellor could tinker further with inheritance tax (IHT) and capital gains tax (CGT) rules.
The crucial thing to remember is that, for the moment, this is all pure speculation. Making snap decisions based on rumours can derail long-laid financial plans and prove very costly in the long-run – as some people learned last year when they panicked and cashed in pension lump sums on the back of hearsay that the tax-free allowance could disappear.
In the Autumn Budget, the Chancellor reveals tax, borrowing and spending plans for the year ahead while trying to ensure the state finances remain balanced.
Last October, Rachel Reeves’ first Budget delivered a record £40bn of tax rises. At the time, she said she was not looking to repeat this in 2025. But with the global economy still looking fragile, UK growth remaining anaemic and the spring Spending Review committing significant additional sums to defence and the NHS, many expect the Chancellor will be looking for new ways to raise revenue this year.
So what could be in the famous red box this autumn?
ISA changes
In the Spring Statement, the government confirmed it would undertake a thorough review of Individual Savings Accounts (ISAs). This led to widespread speculation that the overall limit could be cut for cash ISAs.
Currently, all adults can save up to £20,000 a year into tax-efficient ISAs, either through a stocks and shares ISA, a cash ISA, or a combination of both.
Announcing this review, Ms Reeves said it would look at whether the system is “getting the balance right” between cash and equities (shares). The government has made no bones about its desire to encourage more people to invest, rather than leave their money sitting in savings accounts. It hopes this will deliver better returns for savers while also boosting economic growth.
Restricting ‘salary sacrifice’ options
Many employees choose to ‘sacrifice’ part of their salary in exchange for higher contributions into their workplace pension. This can be tax-efficient for both the employee and the employer, as pension contributions – unlike salary payments – are not subject to income tax or National Insurance. This option has become more attractive for employers following April’s increase in their NI rates.
But speculation is rife that this could be scaled back, following the publication of HMRC research into how employers might react should the rules be changed. Sir Steve Webb, a pensions minister in the coalition government, said this research suggested changes to salary sacrifice were ‘firmly on the Treasury’s agenda’. However, it should also be noted that it was the previous government that commissioned this HMRC research.
There are several ways the government could limit salary sacrifice and recoup some of the tax revenue lost through these schemes. One option might be to cap the amount individuals can sacrifice – effectively targeting higher earners who are maximising these arrangements. However, the government could take a broader brush approach and remove the NI exemption, or both the NI and tax exemption, on all of these salary sacrifice payments.
Pensions tax-free cash
Last year, it was expected that the government might further restrict the 25% tax-free cash that can be taken from pensions (currently capped at £268,275) or reduce the higher rate tax relief on pension contributions. In the event neither happened, although pension providers reported afterwards that there had been a spike in people accessing pension funds in advance of the Budget. This may have had negative consequences for future financial planning for those individuals. This highlights the dangers of making financial decisions on the back of speculation, without seeking advice or guidance on your options.
Tax relief on contributions hasn’t reappeared in the rumour mill, but given the relatively high cost of tax relief on pensions (particularly for higher earners) it is a potential lever for the Treasury to raise money.
For more information about how the government might change pensions, see our comprehensive guide here: How might the government change pensions?
Capital Gains Tax (CGT)
The government hasn’t indicated it is actively reviewing CGT. But given its manifesto commitment not to raise income tax, National Insurance or VAT, it is inevitable it may turn to other taxes — such as CGT and inheritance tax (IHT) — if it needs to boost revenue.
The Chancellor did raise CGT rates at the last Budget — increasing the lower rate from 10% to 18% and the higher rate from 20% to 24%. These rates could be raised again, or Reeves may consider applying specific rates to certain asset classes, for example second properties. Alternatively, she could further reduce the annual exemption allowance — the amount investors can realise in gains before CGT is applied. However, this allowance has already been pared back to the bone in recent years: from £12,300 in 2022/23, to £6,000 in 2023/24, and now stands at just £3,000.
Inheritance tax (IHT)
The government introduced a number of IHT changes in the last Budget. The most high-profile is the plan to impose IHT on agricultural holdings from April 2026. But the decision to include the unused value of pension funds within a person’s estate for IHT purposes, coming into effect in April 2027, will affect more people.
Given the complexity of IHT rules, particularly around the various gift allowances, there may be scope to simplify the regime with a view to raising additional revenue. For example, the Chancellor could extend the period donors must live after making a substantial gift before it falls outside their estate for IHT purposes. Currently this is seven years, but there have been suggestions in the past that the Chancellor could raise it to 10 years.
There have also been rumours the government could impose a lifetime cap on the value of gifts people can make that are IHT-free. Currently the value is essentially unlimited as long as the person lives another seven years after making the gift.
Read more about how this could impact estate planning here: Autumn Budget: inheritance tax and other possible changes
While it may be tempting to rush into making gifts to children or grandchildren in case allowances disappear, it’s very important to think about the long-term implications of such a decision and whether you may need that money later in life.
The Chancellor may also choose to further extend the freeze on the nil-rate band beyond 2030. Currently, IHT is charged on estates worth more than £325,000 – although there are additional allowances covering the family home, which effectively allow married couples to pass on assets of up to £1 million to their children or grandchildren.
The £325,000 nil-rate band has been frozen since 2009, while the residence nil-rate band has remained unchanged since 2017. Keeping these thresholds level, or even reducing them, is likely to raise significant revenue, as more families find themselves liable for IHT due to rising property and asset values.
Property taxes
There’s growing speculation that the Chancellor may consider a broader overhaul of property taxation.
One proposal reportedly under review is the replacement of stamp duty and council tax with a single annual levy on homes above a certain value. Such a move would likely have a disproportionate impact on homeowners in high-value regions like London and the South East.
Other potential changes that have been mentioned include the introduction of new, higher council tax bands aimed at increasing revenue from more expensive properties and the possibility of introducing CGT when people sell their primary home if it sells for more than a set amount.
Currently, primary residences are exempt from CGT so this would be a significant change in policy.
National Insurance on landlords
According to some reports, the government may use the Autumn Budget to start charging National Insurance (NI) on rental income.
NI is currently paid by employees earning more than £12,570 a year and by self-employed people making a profit of more than £12,570 a year. Earnings from buy-to-let properties are largely exempt from NI contributions.
The rates for employees are 8% on earnings over £12,570, and 2% on earnings over £50,270, while for the self-employed the numbers are 6% and 2% respectively. It’s unclear currently, if the policy were implemented, whether landlords would pay the same rates as employees or the self-employed.
According to the Office for National Statistics (ONS), landlords earned £27 billion of net property income in 2022-23. An 8% NI levy on that would have generated c£2.2 billion.
Income tax
While Labour has pledged not to raise the headline rates of income tax, National Insurance, or VAT, there’s still room for fiscal manoeuvring. One likely route is a continued freeze on income tax thresholds – a tactic often referred to as ‘fiscal drag’. As wages rise over time, frozen thresholds mean more people are pulled into higher tax brackets without any formal rate increase.
Wealth tax
Within Labour’s ranks, there have been calls to introduce a new tax targeting the UK’s wealthiest individuals. This could take the form of an annual charge on those with assets exceeding a certain threshold. However, there’s no party-wide consensus on the idea, and critics warn it could prompt wealthy people to flee the country or discourage investment.
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