What taxes could be raised in the Autumn Budget?

Reeves’ surprise Downing Street address this week sparked increased speculation that tax rises are coming in this month's Budget.

While Labour had previously pledged not to raise income tax, VAT or national insurance for employees, Reeves refused to rule out tax rises to plug a hole in the public finances, stating that “easy answers” to fix economic issues would be “irresponsible”.

The latest official figures show UK government borrowing reached £20.2 billion in September, the highest for that month in five years, bringing total borrowing for the first half of the fiscal year close to £100 billion — well above forecasts. Analysts estimate a £30 billion fiscal gap ahead of the November 26th Budget.

Reeves pointedly declined to restate Labour’s 2024 manifesto commitment, saying only that she would “set out the individual policies at the Budget.” 

Nigel Green, chief executive of deVere, believes anyone with exposure to UK assets should now assume that changes to capital gains tax, dividend allowances, inheritance thresholds, and pension reliefs are probable, not possible.

The most likely targets, predicts deVere, are the ones governments reach for first in a fiscal squeeze: “Freezes to inheritance thresholds, reductions in higher-rate pension relief, tighter dividend allowances, or alignment of capital gains with income tax can all be described as modernisation."

Capital Gains Tax

The Government previously increased capital gains tax (CGT) rates at last year's Budget.

The tax is paid on the profits when an asset is sold. The basic rate increased from 10% to 18% and the higher rate from 20% to 24%. 

The rates of CGT on residential property, including on buy-to-let and second homes, were maintained at 18% and 24% at last year's Budget, so could be on the cards this year.

Private Residence Relief, which means that main residential properties are exempt from capital gains tax, was also maintained at the last Budget.

However, according to HMRC estimates, a 1 percentage point increase in the higher rate of capital gains tax would actually reduce revenues by about £30 million in 2029–30, while a 10 percentage point increase would reduce revenue by about £3.7 billion in the same year.

Inheritance Tax

Inheritance tax currently raises a relatively "modest amount of revenue" – just over £9 billion in 2025–26 – according to the Institute for Fiscal Studies (IFS).

There are a number of ways in which the Chancellor could increase that figure. An increase of 1 percentage point from the current rate of 40% would raise £0.3 billion in 2029–30. Another would be to reduce the threshold at which the tax begins to be paid, bringing a larger share of the population into scope of the tax (in 2025–26, 6.2% of UK deaths are expected to result in an inheritance tax charge, though that is already forecast by the Office for Budget Responsibility to rise to 9.7% by 2029–30, the highest level for more than half a century).

Currently, individuals are allowed to pass on up to £325,000 of wealth tax-free, with an additional £175,000 tax-free allowance that can be used only when passing on a primary residence (or the value of a previously sold primary residence, if higher) to a direct descendant. Abolishing the second of these allowances (known as the residence nil-rate band), for example, would raise around £6 billion in 2029–30 (before behavioural response), IFS analysis shows.

Earlier this year, the government was reportedly considering introducing a lifetime gifting cap as part of its Budget plans.

Proposals under review reportedly include changes to how wealth can be passed on before death to reduce inheritance tax liabilities. One option being discussed is the introduction of a lifetime cap on gifting.

Currently, gifts made more than seven years before a person’s death are exempt from inheritance tax. Those given between three and seven years beforehand are subject to a tapered rate of tax, which falls each year from 32% to 8%.

A lifetime gifting cap would set a limit on the total value of money or assets an individual can transfer during their lifetime as part of inheritance planning. Treasury officials are also examining whether the taper rate should be revised.

In last year's Budget, the government announced plans to bring most unused pension funds and death benefits into scope of inheritance tax from 2027. The measure is expected to raise £1.46bn per year for the government by 2029/30.

Pensions

In addition to the existing plans to bring unused pension funds into the scope of inheritance tax, pensions provider Penfold identified a number of other areas the Government may review in the Budget: 

1. Salary sacrifice 

Currently, many employees boost their pension contributions through salary sacrifice, reducing both their own and their employer’s National Insurance bill. 

However, Treasury insiders are reportedly exploring ways to remove employer NI exemptions, a change that could raise up to £17 billion but would reduce the incentive for businesses to offer the benefit. Any reform of this scale would likely require consultation and phased implementation. 

2. Pension tax relief 

At present, pension contributions attract tax relief at the saver’s marginal rate - 20%, 40% or 45%, depending on income. Analysts suggest the government may introduce a flat rate of around 30% to simplify the system and reduce costs, potentially generating £15 billion in additional revenue. Such a move would benefit basic-rate taxpayers but reduce relief for higher earners. 

3. Tax-free cash allowance 

The 25% tax-free lump sum, capped at £268,275, has long been viewed as a cornerstone of UK pension policy. 

Recent reports suggest the allowance could be reduced to raise funds without breaching headline tax promises – though no official plans have been confirmed. 

4. Lifetime allowance 

A possible return of the pension lifetime allowance, abolished in 2023, is also being discussed. Reintroducing a cap on the amount of pension wealth that can grow tax-free would primarily affect higher earners and long-term savers.