Autumn Budget 2025: Sifting the Rumours on Tax Rises and Reforms

With just under a month to go until the Government unveils the autumn budget for 2025, speculation is mounting amid renewed concerns about a weakening economy, not least after the Chancellor held an “unusual” pre‑Budget conference to provide context for the Government’s forthcoming decisions. 

Reports suggest that the Chancellor is focused on eliminating a spending gap estimated to be between £20bn-£40bn. Despite the Government’s first budget aiming to “wipe the slate clean and put our public finances on a firm trajectory,” expectations of further tax rises persist. Until recently, ministers appeared committed to their manifesto pledge not to increase income tax, employee’s national insurance contributions or VAT, and attention had turned to a suite of alternative measures. However, concerns are now circulating that the Government may be considering raising income tax alongside other revenue‑raising measures. The central question for businesses, individuals and advisers is: who will ultimately shoulder the burden?

This article considers some of the potential reforms in the autumn budget and their likely impact.

Income Tax

The Chancellor is likely to consider extending the freeze on personal higher-rate income tax thresholds which was due to end in 2028. Reportedly, by extending the ‘fiscal drag’ to 2030, the Chancellor would generate around £8bn in revenue, as more people’s earnings would fall within the higher tax bands. 

By continuing the fiscal drag, which was first introduced in 2021, the Chancellor would be able to generate further revenue while maintaining the commitment not to increase the headline rates of income tax. 

Many are also well aware of the rumours about a potential hike to income tax. As one of the “big three” revenue raisers, such a move would materially support the Government’s fiscal goals, but it risks eroding public confidence if cost of living pressures fail to ease. 

Inheritance Tax (“IHT”)

Although inheritance tax has already been targeted - with new measures affecting farms, businesses and pensions due to commence in April 2026/2027 - the Government is allegedly looking at further tightening the rules on lifetime gifting, and perhaps surprisingly, further altering agricultural property relief. 

Agricultural Property Relief

It appears that the protests by farmers who brought tractors into central London have not gone unnoticed by the Government. The Chancellor is understood to be under pressure to revise her proposal to impose a 20% inheritance tax charge on farmers with assets exceeding £1 million. Rather than abandoning the reform entirely, the conversations seem to be on increasing the threshold to £5 million. However, raising the threshold may also be accompanied by an increase in the applicable rate to the full 40% inheritance tax rate on death for value above the increased allowance.

Lifetime Gifting

A reform on the IHT regime around lifetime gifting could either mean the Chancellor capping the value of gifts or extending the duration the gift giver has to survive for to avoid paying inheritance tax. 

Under the current rules, an outright gift of an asset is a ‘potentially exempt transfer’ which is not subject to an inheritance tax liability if the gift-giver survives for seven years. If the gift-giver passes away during the seven year period, a reduced rate of tax will be payable after the third year and tapers until they survive seven years. 

If the duration which a person must live for is extended, for example to 10 years, the Government will have to review the taper relief profile. Alternatively, the implementation of a cap would need to provide a reasonable threshold – a strict cap at £500,000 is not likely to be welcomed.

Property Taxes

Stamp Duty Land Tax/Council Tax

Many of the rumours have focused on a full replacement on the SDLT and council tax regimes with two new ‘land taxes’. There have been many variations in the rumours about how these new regimes would operate, so we have briefly summarised the main concept circulating in the media. 

One possibility is a levy on the sale of a property, as opposed to the purchase, above a certain amount. Alternatively for high-valued properties, a ‘national tax’ is being considered as a replacement for SDLT. This could mean the owners (i.e. the eventual sellers) will be subject to an annual tax rather than requiring buyers to pay an upfront charge on purchase. The amount payable would be determined by the value of the property, with the rate set by central government.

As for council tax, this would be replaced with a new “local” property tax calculated by reference to the property’s value, paid by the owner, at a rate set by each local authority. The council tax bands are currently based on valuations from the 1990s; therefore, updating this regime could lead to a fairer system, as it is reported that some owners of high-value properties are paying similar rates to those who own lower‑value properties in small towns.

Whilst there is a lot of speculation on this, a wholesale replacement on budget day would certainly be ambitious: the policy design would be complex, may yield less revenue than the existing regime, and could struggle to protect people who may be asset-rich but cash-poor. 

Capital Gains Tax

The Government may reform the capital gains tax regime either directly, by increasing rates, or indirectly, for example by changing the thresholds or by introducing a ‘mansion tax’ on high‑value homes and removing the current exemption from capital gains tax on the sale of a primary residence.

At present, if a UK resident disposes of their home, which is their primary residence, they will generally benefit from 100% relief by claiming the principal private residence relief. However, by ending this relief, higher rate taxpayers would have to pay 24% of the value of gain made from the increase in value of their property. 

Whilst this is a possible change the Chancellor may introduce, it is suspected that the removal of this relief would be beyond a specific threshold, so it won’t affect everyone. 

A Wealth Tax

There have been discussions over the years of introducing an annual wealth tax on Britain’s wealthiest citizens – this could be in the form of a 2% tax on assets valued above £10 million. 

The obvious issue is that this would discourage international HNW individuals from coming to the UK, whilst potentially motivating more wealth to leave at a time where the Government is keen on promoting investment in the economy. 

Exit Tax for Wealthy Britons 

Finally, the Chancellor is considering an “exit charge” on wealthy individuals leaving the UK. This proposal may be an attempt to alleviate concerns that 16,500 millionaires may leave the UK this year in response to “hostile” tax changes and a weakening economic outlook.

Under this proposal, a 20% tax would be levied on gains embedded in assets, including shares and bonds, at the point of the individual’s exit from the UK. This measure would prevent individuals from avoiding paying Capital Gains Tax on UK assets by selling them after they have relocated to a low-tax jurisdiction.

For the Chancellor to reap the rewards of this tax, she would need to introduce this change almost immediately to capture those who were already planning on leaving the UK. While comparable exit-tax regimes exist in other countries, it may be detrimental to the economy to remove an attractive tax benefit at a time where the country needs investment and capital in order to grow. 

Conclusion 

With the rumour mill continuing in full swing, speculation will continue to rise until there is clarity on the potential changes. Whilst this article looks at some of the proposed changes circulating in the mill, there is potential for the Chancellor to announce unexpected reforms. Therefore, if you are considering estate planning ahead of the budget, please contact the Private Client team at Charles Russell Speechlys who can provide you with tailored advice to your personal circumstances and goals.