Autumn budget 2025: what might we expect?

The Chancellor, Rachel Reeves, has now confirmed that her Autumn Budget will be delivered on Tuesday 26 November. While there has been no shortage of media speculation in recent weeks, the truth is that none of us will know the precise content until the Chancellor sets out her plans at the despatch box. What we can do in advance, however, is take stock of the government’s position and consider the direction of travel.

A likely shift towards higher taxation

The UK’s fiscal position leaves little room for manoeuvre. Last year, borrowing stood at £148.3 billion and overall government debt now sits close to £2.9 trillion, roughly equivalent to the size of the UK economy itself. With gilt yields at multi-decade highs – 10-year borrowing costs around 4.7% and 30-year at 5.55% – the cost of servicing this debt is straining the public finances. The more spent on interest, the less remains available for public services.

That in turn leaves the government with difficult choices: grow the economy faster than borrowing costs, reduce expenditure, raise taxes, or attempt to delay action. Of these, growth on the required scale looks improbable, and continued inaction would risk a market backlash. Spending cuts are politically challenging for a Labour government elected on a platform opposing austerity. That leaves taxation as the most realistic route.

Where revenue might be raised

The Labour manifesto of 2024 pledged not to increase Income Tax, National Insurance, or VAT. Assuming this position is maintained, the government’s scope is narrower but still significant. Options being speculated upon include:

• Freezing tax thresholds: By maintaining frozen Income Tax bands, more individuals are drawn into higher rates as wages rise with inflation. This could raise billions in additional revenue, albeit by stealth.
• Reforming pension tax relief: A flat rate of relief, or restrictions on tax-free lump sums, would reduce the cost to the Treasury and have been rumoured in the last couple of budgets. Given how difficult it may be to implement either of these, it feels unlikely that an immediate change is made without some form of protection or warning. However, as we have seen with previous budgets, nothing is 100% off the table. With annual tax relief from pensions costing more than £50 billion, this remains an attractive target for reform. Some feel that this sort of tax change would ultimately disincentivise younger people paying into pensions, ultimately creating a bigger problem longer term.
• Property taxation: Proposals have circulated regarding an extension of Capital Gains Tax to high-value primary residences, with thresholds suggested at £500,000 – a level that could bring many ordinary homes into scope. Alternatives include replacing Stamp Duty Land Tax with a recurring property levy, or long-discussed reforms to Council Tax.
• Wealth and Capital Gains Tax: Some within Labour are supportive of a wealth tax, or raising CGT rates towards alignment with Income Tax. Others caution against measures that could discourage investment or drive capital abroad.
• Industry-specific taxes: Rising duties on gambling, fuel, or unhealthy products remain possibilities, though some – notably fuel duty – are politically delicate given their inflationary impact.

Preparing for the budget

While much remains uncertain until 26 November, one theme feels unavoidable: taxes are set to rise in some form. What matters most is how individuals prepare for this and the broad guidance is to wait until we understand more about what the changes may be rather than acting on speculation. Effective financial planning based on current tax rules, especially if there is something that you are planning to do anyway and can be done before the budget, is a sensible plan. Perhaps you have been meaning to sell old company shares, make a gift to kids or rearrange your assets in some form. Doing this now can help ensure that your wealth and investments remain aligned to your long-term objectives, using the current tax rules and not having to wait to find out what the Chancellor announces.

On behalf of our clients, Carbon will continue to monitor the news pre-budget to find out if anything is confirmed but, more likely, we will provide a detailed review and analysis of the Budget once its measures are confirmed on 26^th November. In the meantime, if you would like to discuss how potential changes may affect you, please contact your financial planner.

Important Note

This article is provided for information purposes only and should not be regarded as financial advice. Decisions should not be made based on this material without first consulting a qualified financial planner who understands your personal circumstances. Information is based on sources believed to be reliable, but accuracy cannot be guaranteed. This content is directed primarily at UK residents.