FINANCE // Autumn Budget & Proposed Tax Changes
Labour’s first year in office has already delivered the sharpest tax rises in a generation, from capital gains and inheritance tax reforms to higher employer contributions. Yet with a fiscal gap of up to £50 billion, Chancellor Rachel Reeves now faces a defining Autumn Budget. Can Labour honour its pledge not to raise headline rates while turning to stealth freezes, wealth taxes, and property reforms to balance the books? This article unpacks the changes so far, the pressures ahead, and the scenarios that could reshape Britain’s tax landscape.
Nearly a year into its first term, Labour has already overseen one of Britain’s largest tax increases in decades. Now, as Chancellor Rachel Reeves prepares her second major fiscal statement this autumn, the government finds itself at a precarious juncture: how to reconcile a promise not to raise headline taxes with the growing reality of a yawning budget gap.
The Chancellor has officially confirmed that the Autumn Budget will be delivered on Wednesday, November 26. She emphasised a disciplined approach to spending as inflation and borrowing costs remain elevated. This Budget will coincide with updated Office for Budget Responsibility (OBR) economic forecasts to address an estimated £20 billion deficit amidst prior promises not to raise major taxes for working people.
In October 2024, Ms. Reeves announced roughly £40 billion in tax rises, the steepest since the early 1990s. The measures included higher employer National Insurance contributions, a sharper capital gains tax regime, and the most significant inheritance tax reforms in a generation. Agricultural estates valued above £1 million will face a new levy beginning in 2026, while pensions will be counted as part of taxable estates from 2027.
Taken together, the steps pushed Britain’s tax burden toward levels not seen in modern history with the Office for Budget Responsibility projecting revenues at nearly 38 percent of GDP by the end of the decade.
Yet when Ms. Reeves stood before Parliament in March for her Spring statement, she struck a different tone. Emphasising restraint, she unveiled cuts to welfare and civil service headcount while insisting no further taxes were planned at that moment. It was a nod both to shaky economic growth forecasts and to Labour’s election pledge not to raise income tax, VAT, or employee National Insurance.
Rising Pressure
That pledge is now under strain. Independent forecasts suggest a fiscal shortfall of between £40 billion and £50 billion, forcing ministers to hunt for revenue without triggering a voter backlash. “The government is running out of room to manoeuvre,” said Torsten Bell, the economist recently drafted into Downing Street as chief of staff. His appointment, along with that of Minouche Shafik, the former LSE director, signals Labour’s willingness to lean on technocrats as it weighs politically fraught decisions.
Among the options under review: applying National Insurance to rental income, a move that could raise billions but risks inflaming Britain’s already tight housing market. Officials are also considering extending the freeze on income tax thresholds beyond 2028, a so-called stealth tax that quietly drags more households into higher brackets.
Other ideas carry even greater political peril. A shift from stamp duty to an annual property levy, dubbed a “mansion tax” by critics, is being studied, as are changes to pension tax reliefs that could standardise benefits at a flat rate. Levies on gambling and unhealthy food are likely candidates for incremental revenue, while fuel duty, long frozen for political reasons, may be revisited.
The Politics of Fairness
Ms. Reeves has framed her fiscal strategy around fairness, a message she hopes will blunt criticism from both business and middle-income households. Her allies argue that the party is merely asking wealthier Britons to contribute more, while protecting working families from direct increases in headline rates.
But markets, too, are watching closely. The gilt market turmoil of 2022 remains a vivid memory, and economists warn that any sign of fiscal drift could test investor confidence once more. Some advisers are urging the government to go further, arguing that bold pro-growth measures, such as reforms to planning laws or even a re-examination of Britain’s trading relationship with Europe, will be necessary to convince skeptics.
A Moment of Decision
For Prime Minister Keir Starmer, the stakes could hardly be higher. Labour’s electoral mandate rests in part on restoring stability after years of political volatility. But if the government leans too heavily on tax rises, it risks accusations of betrayal. If it does too little, it risks economic stagnation and fiscal crisis.
“The choice is whether Labour plays it safe, or whether it sets out a vision for long-term renewal,” said Sushil Wadhwani, a former member of the Bank of England’s Monetary Policy Committee, who has called for land taxes to replace what he views as distortionary levies on labor.
When Ms. Reeves rises to deliver the Autumn Budget, she will attempt to square that circle. For now, voters, businesses and markets alike are left to wonder: will Labour govern cautiously, or will it seize the moment to rewrite the rules of Britain’s tax system?
Strategic Takeaways & Action
Individuals & Families: Plan ahead: review estate and pension arrangements now to mitigate future IHT exposure. Consider timing disposals, using ISAs or other tax-efficient wrappers to tackle CGT pressures.
Small Businesses & Employers: Factor in higher employer NIC and compliance costs. Take advantage of simplification schemes and administrative reforms to streamline operations.
Property Investors & Landlords: This sector is in flux: property taxes and NI on rent are under review. Stay agile and monitor Autumn Budget announcements.
Wealth & High-Net-Worth Individuals: Now is the time to revisit estate planning, especially in light of pension inclusion in estates and wealth/IHT reforms.
Labour Tax Changes Implemented (2024–25)
Employer National Insurance rise → 15% on salaries above £5,000; threshold cut from £9,100
Capital Gains Tax increase → 18% (basic rate), 24% (higher rate)
Inheritance Tax reform → 20% IHT on agricultural estates >£1m from 2026
Pensions included in IHT → from 2027
Tax thresholds frozen → until 2028
Tighter penalties → for late VAT and self-assessment filings
Civil service cuts → 10,000 jobs; welfare reforms for under-22s
Possible Autumn Budget 2025 Measures
Extend tax band freeze → potentially beyond 2028
National Insurance on rental income (~8%)
Reform pension tax reliefs → move toward flat-rate relief
Property tax shift → replace stamp duty with annual levy (“mansion tax”)
Inheritance Tax tightening → further limits on exemptions/reliefs
Consumption taxes → higher gambling levies, unhealthy food duties
Fuel duty rise → long-frozen but under review
Growth-oriented reforms → land tax, planning liberalisation, EU trade realignment
