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Last year’s big tax-raising Autumn Budget should have been a one-off, but Autumn 2025 promises more of the same.
Rachel Reeves’ Budget premiere last October produced tax rises amounting to over £41 billion a year by 2029/30. In an interview following that Budget, the Chancellor said, “…there’s no need to come back with a budget like this. We’ll never need to do that again.”
Some taxes will have to increase
Under a year later, the notion that the 2024 Budget was a one-and-done affair now looks wishful thinking. In early August 2025 the independent National Institute of Economic and Social Research suggested the Chancellor would need to find more than £50 billion in additional taxes and/or spending cuts to stay within her ‘cast iron’ fiscal rules. The government does not recognise that figure. If tax rises are inevitable – something the Treasury does not deny – then where could the Chancellor target? The government’s stance reiterates its manifesto promise not to increase the rates of income tax, VAT and national insurance (for employees, anyway). As these are the three largest sources of tax revenue, this is a major constraint on raising revenue.
Likely targets
One likely non-rate income tax increase is a two-year extension to April 2030 of the freeze on allowances and tax bands. This allows inflation to drag more people into tax and pushes existing taxpayers into higher rates. A good example is the £12,570 personal allowance, first set in 2021/22, which would now be about £15,000 without the freeze. A cut to income tax and/or national insurance relief on pension contributions is a regular Budget candidate which, to date, has only attracted limited tweaking via the pension annual allowance. It’s a tempting target – the latest figure for the cost of relief is over £78 billion. One frequently suggested reform that might become reality is for income tax relief to be set at a flat rate – say 30% – rather than the current marginal income tax rate of up to 45% (48% in Scotland).
The Chancellor has already made clear she wants to reduce the amount that can be invested in cash ISAs (currently 100% of the maximum £20,000 subscription, frozen until 2030). Any restriction could have a wider impact, catching some funds currently classed as fixed-interest investments within stocks and shares ISAs. Another rise in capital gains tax rates is unlikely after last year’s changes, but there could be an increase to the tax on share dividends by, for example, raising the rates to bring them into line with other income tax rates.
Precautionary steps
Some useful pre-Budget actions are obvious, such as making pension contributions before the Chancellor speaks. Beyond the tactical approach, there is also strategic planning, which normally requires personalised advice. This could involve minimising taxable income as far as practical, making full use of independent taxation and timing income so that important thresholds (e.g. £100,000 at which the personal allowance is tapered) are only crossed every other tax year.