Autumn Budget 2025: what to expect

Chancellor Rachel Reeves is, once again, under pressure to deliver a Budget that must make a positive impact on the UK’s finances.

But this time, pressure has a different shape. While last year the Labour party claimed it had inherited a black hole in the economy left by the Conservative party, this time round it’s grappling with an economy that has failed to deliver on the expected growth levels.

In this article, I’ll cover what is known, as well as some of the areas where there might be room for the Chancellor to make changes that may impact our client’s journey towards financial freedom.

What do we know?

The Chancellor will deliver the Autumn Budget on 26 November, making this one of the latest fiscal events to take place in the calendar year in recent years.

This will allow the Chancellor a bit more time to devise measures that will enable growth and reduce the hole in the public finances, which economists believe could be as much as £40bn.

Potential changes

There are different buttons the Chancellor could push to close the gap in the economy which could affect those thinking about their journey towards financial freedom.

It’s important to note that most of the following measures are based on potential actions, none of which are confirmed for implementation. I, and 7IM encourage you not to make any decisions based on these potential changes, however it would be prudent to start thinking of the potential impact they may have on you.

Pension Tax Relief

• Flat Rate Relief Proposal: One of the most talked-about ideas is replacing the current system of marginal-rate tax relief with a flat rate—possibly around 20% to 30% for all taxpayers.
• Currently, basic-rate taxpayers get 20%, higher-rate 40%, and additional-rate 45%.
• A flat rate would reduce benefits for higher earners but increase support for lower earners.
• The Institute for Fiscal Studies (IFS) estimates this could raise £15 billion annually, mostly from the top fifth of earners.
• Salary Sacrifice Reform: HMRC has explored capping National Insurance exemptions on salary sacrifice schemes. One scenario would allow NI exemption only on the first £2,000 of sacrificed salary
• Cap on Tax-Free Lump Sum: Another proposal is to reduce the maximum tax-free lump sum from £268,275 to around £100,000, potentially saving £2 billion per year.

Several recent newspaper articles have implied the Chancellor will reduce, or worse remove entirely the amount of tax-free cash that can be taken from a personal pension.

Currently, it is possible to access 25% of your total pension value as a tax-free lump sum, however there is a cap on the total tax-free cash amount that can be withdrawn during an individual’s lifetime, this is £268,275.

We acknowledge the upcoming fiscal announcements are likely to bring several changes that could significantly affect a clients retirement provisions and financial plans. Our advice however is pause for thought.

Accessing tax free cash, unless appropriate to do so, before the budget could have a significant negative impact on your financial plan. Waiting ensures that clients make fully informed decisions based on the most up-to-date tax landscape, safeguarding long-term financial security and maximising pension value.

History has shown us, and it is our opinion, any changes to tax free cash cannot be implemented over night and would take several months to come into effect. This would allow clients to review their financial position and act accordingly, in their best interest.

Inheritance tax

It has been widely speculated that the Chancellor could introduce further changes to the inheritance tax (IHT) regime.

Since the Autumn Budget last year, the government has introduced legislation on the inclusion of pension pots into the value of an estate for IHT purposes.

This measure, which is due to come into effect from April 2027, has prompted some individuals and families to contact me, to start considering ways of minimising any legacy IHT bills.

If the government is looking to increase revenues originating from IHT, it could alter the rules around gifts. Under current legislation, individuals are allowed to gift £3,000 tax-free every tax year.

There are other various exemptions to tax-free gifting, so if you’re interested in this option, please do not hesitate to contact me for further information.

Gifts are subject to the seven-year rule and any gifts above the exemption thresholds may be liable to IHT in the event the donor passes away within seven years. Any gifts above the exemption thresholds are subject to the seven-year rule, which dictates IHT is payable on them in the event the person gifting, passes away within seven years of gifting

The government could look at increasing revenues by increasing the period under which IHT is payable after gifting, or even abolish the gifting allowances.

In addition, the government could consider making changes to the nil-rate band (i.e., the value of the estate no IHT is payable, currently £325,000) by extending the freeze beyond 2030 or by reducing the nil-rate band.

Capital gains tax

In last year’s Budget, the government increased the lower rate of capital gains tax (CGT) from 10% to 18%, and the higher rate from 20% to 24%.

Even though the government hasn’t reported to be considering changes to its CGT regime, it could look for ways of increasing revenues from this type of taxation. One way could be to further increase the rates; and it could also reduce the annual exemption allowance, or even abolish it.

At the time of writing, the exemption allowance stands at £3,000.

Property tax

Some media reports have mentioned the government could indeed abolish the CGT exemption for high-value homes (a mansion tax) as it looks to overhaul the UK’s property tax system.

It is also thought that the Chancellor is considering ending the CGT exemption on primary residences, which could mean applying a 24% rate on the increase in the value of a property for homeowners who are higher-rate taxpayers.

Experts have criticised the introduction of further rates on property transactions, as a measure that could slow down the property market, as well as discourage anyone to downsize.

Rental income is not currently subject to National Insurance contributions, this could be an area for change, which would reduce the attractiveness of holding Buy-To-Let properties.

At 7IM, we have in-house mortgage experts, that have been following these developments closely and will be happy to discuss your options with you if the government decides to make any property tax-related changes.

Income tax

The Labour party has pledged not to raise headline rates of income tax, national insurance or VAT. But it could extend the freeze on income tax thresholds, creating a fiscal drag.

When fiscal drag occurs, individuals’ wages increase with time and they jump into higher tax brackets, having to pay more tax without any changes in taxation rules.

How to prepare for the Budget

The best way to prepare your finances, at any point in time, is to ensure your financial plan is leveraging all the possible benefits of the current rules and you are in regular contact with your Financial Planner, to react to any changes that are announced..

It would be premature to make changes based on the assumption of any changes in the upcoming Budget. However, if you’re worried about how these potential changes could affect your finances, talk to us; whether you’d like to understand how any changes might affect you, or perhaps you’re seeking reassurance that your wealth plan represents your current ambitions and is working hard for you – we’ll be delighted to help you prepare for the future and implement a plan to help protect against pressures to your financial needs and objectives. And help implement a plan to protect you from any threats to your financial needs and objectives.