Autumn budget 2025: Key tax changes and predictions

The Autumn Budget 2025 will be delivered on Wednesday 26 November, Chancellor Rachel Reeves faces a difficult balancing act between plugging a growing fiscal deficit and delivering on promises of economic growth and stability. Levels of public borrowing remain high; inflation remains above target, and public spending pressures continue to mount – meaning tax rises are beginning to be viewed as inevitable rather than optional.

While manifesto pledges commit the government not to raise the main rates of Income Tax, National Insurance or VAT, this leaves considerable scope for indirect tax increases, threshold freezes and tightening of reliefs. Below, we explore some of the predictions and policy options that may shape the Budget – and what they could mean for individuals and businesses.

1. Inheritance Tax (IHT) reform: lifetime gifting cap in focus

Rumours continue to build around a new lifetime cap on IHT-exempt gifts, limiting the value that can be gifted tax-free before death. This would represent a major departure from the current system, where gifts made more than seven years before death are typically exempt.

Other IHT reforms potentially under consideration include:

• Extension of the nil-rate band freeze (£325,000) to 2030
• Restrictions to taper relief for gifts made within seven years of death
• Reduction or removal of the residence nil-rate band (£175,000)

With last year’s changes already limiting Business Property Relief and Agricultural Property Relief from April 2026, the direction of travel is clear: intergenerational wealth transfers are likely to be on the Treasury’s radar.

2. National Insurance on rental income and “unearned income”

The Chancellor has faced mounting pressure to tax income from capital more like income from work. One proposal gaining momentum is to extend Class 4 National Insurance to rental profits, possibly at a lower rate than for employment income. The rationale is political as much as fiscal – it would be framed as a “fairness measure”.

Potential impacts:

• Increase effective tax rates for landlords
• May reduce supply of rental property and/or see an increase rents

There have been suggestions that dividend and pension income could be included in NI calculations – a move politically targeted at high earners and wealth holders.

3. National Insurance increases for LLP members

There are growing reports that the Chancellor may look to introduce or expand National Insurance contributions for members of Limited Liability Partnerships (LLPs). Currently, LLP members are generally treated as self-employed for tax purposes and do not pay Class 1 employer’s National Insurance.

If enacted, the new LLP NI charge could result in a combined effective tax and NI rate of up to 77% for members earning over £100,000, particularly once the loss of tax-free childcare benefits is considered.

Although early indications suggest that this new charge could be set below the full employer’s NI rate, it would still represent a substantial additional cost for higher-earning members. Given that the current marginal rate at that income level already stands at around 62%, any additional NI burden would push total taxation to unprecedented levels – potentially discouraging investment, partnership growth, and professional recruitment.

Such a measure would likely be justified as part of a “fairness in taxation” agenda, but it risks undermining entrepreneurial incentive in professional services and partnerships that play a key role in the UK’s economic output.

4. Wealth tax rumours persist – but remain unlikely

Although frequently discussed, an annual wealth tax is still widely considered impractical and unlikely to feature. HM Treasury analysts are acutely aware of the administrative burden and potential capital flight risk. However, we could see more “stealth” wealth taxes through reforms to Capital Gains Tax, Stamp Duty and IHT rather than a direct wealth levy.

5. Capital Gains Tax alignment – still in play

After last year’s increases, expectations are that Capital Gains Tax changes will be off the table – but alignment with Income Tax rates remains a live option.

Possible measures include:

• Increased CGT rates to 20% / 30% / 40%
• Removal of CGT uplift on death
• Tighter Business Asset Disposal Relief, currently 14% rising to 18% in 2026

Any rise would significantly impact appetite for business growth, business owners planning exits and landlords selling properties.

6. Income Tax – threshold freeze extended

While headline rates may not rise, a freeze on Income Tax thresholds beyond 2028 may be very likely. With inflation still above target, this would pull millions into higher tax bands by 2030, delivering revenue without raising headline rate rises.

This is one of the largest stealth tax measures available to the Treasury.

7. Pension tax reform – a major revenue target

Pension tax relief continues to draw political focus. A move to simplify and limit relief is one of the options available

Pension reform could include:

• Introducing a flat rate of tax relief (25–30%) for pension contributions
• Reducing or capping tax-free lump sums
• Restricting salary sacrifice advantages

With HMRC already tightening reporting rules for pensions, further reform may be likely.

8. VAT threshold and business taxes

To address so-called “VAT threshold bunching”, the Chancellor may:

• Lower the VAT registration threshold from £90,000 to £60,000 or even £30,000
• Keep the 20% VAT rate unchanged but reduce zero-rated and reduced-rated categories
• Extend VAT to private medical services, like last year’s change for private education

For SMEs, a lower threshold would bring over one million small businesses into VAT, raising billions but adding significant administrative burden and rising costs for consumers.

What could this mean for you?

While the final Budget decisions remain unknown, some key themes are clear:

• Taxes on wealth, property and investment are the main targets
• The government may use threshold freezes and relief restrictions as stealth taxation
• Pension and IHT planning windows are closing
• Business owners may need to accelerate restructuring or exit planning
• Landlords and high earners are in the firing line

Ballards Budget Coverage

Ballards will deliver live Budget updates on 26 November, followed by expert analysis tailored to:

• Owner-managed businesses
• Corporate finance teams
• High-net-worth individuals
• Landlords and investors
• General taxpayers and families

How will the Budget affect you?

We’ll be providing live updates and expert analysis on 26 November as the announcements are made.

In the meantime, if you’d like to discuss how any of these potential changes might impact your situation, or understand which areas are most relevant to you, we’re here to help.

Contact us to arrange a conversation or call us directly 01905794504