Looking ahead to the Autumn Budget 2025
Note: for post-budget coverage of this topic, please see Autumn Budget 2025: core facts for investors.
It’s widely believed that this autumn’s Budget will usher in major changes, and larger tax bills, especially for more affluent UK residents. This leaves many people wondering if they should act now to protect family assets.
As Chancellor of the Exchequer Rachel Reeves (pictured above) prepares to reveal all on 26 November, we pinpoint how the Government might seek to raise extra revenue. While it’s all speculation for now, we also explore what measures you might reasonably take in advance of any announcements. Pension savings, inheritance tax planning and property ownership are all under the spotlight.
The problem faced by Rachel Reeves
Reeves has already pledged not to increase Income Tax, National Insurance or VAT for ‘working people.’ However, economists estimate that the government faces a shortfall of between £20 and £50 billion. Rising gilt yields, making Government borrowing more expensive, has added to the strain. As attempts to reduce spending have largely been thwarted, wealth or asset-based taxes are the obvious way to bridge the gap.
What to expect: how might Reeves increase tax revenue?
1. Inheritance Tax
Pension savings are a popular way of transferring assets tax-free to the next generation, but earlier this year Reeves announced that unused pension funds will be subject to Inheritance Tax from April 2027. Making lifetime gifts is one alternative, and so further tightening of rules in this area seems a logical next step.
Currently, all gifts are exempt from Inheritance Tax if the person making the gift survives seven years. It’s also possible to make gifts out of surplus income, which are immediately exempt. Reeves could tweak these rules in many ways. For example, some say the seven-year rule could be extended to 10 years. Others believe that it could be abolished completely. The ability to make other tax-free gifts may also be reduced.
AJB Wealth’s Managing Director, Paul Willans, commented: ‘The proposed pension changes will not only increase the size of many people’s tax bills, but, if their estates rise over £2 million, then they will also suffer from reduced Inheritance Tax allowances. This is because the Residence Nil Rate Band (RNRB) allowance of £175,000 per person is reduced by £1 for every £2 that exceeds the £2 million threshold.’
2. Pensions
Many pension savers have benefited from taking a 25% tax-free lump sum, but there are fears that this attractive perk will not continue as it is. As a result, there has been a surge in withdrawals of this tax-free sum in advance of the Budget. Other potential measures include the reduction of tax relief on pension contributions, limits on salary sacrifice schemes, and even annual levies on pension funds.
3. Tax on property sales
There is currently no tax to pay on the sale of your main residence. As many property owners have benefited from soaring property values in recent decades, some believe it would be equitable to charge Capital Gains Tax (CGT) on high-value primary residences. However, rules would need careful consideration to avoid unintended consequences and a stagnant property market with owners reluctant to crystalise tax bills. We may also see higher council tax bands and tightening rules on Agricultural and Business Property Relief.
4. Investment Income
Tax rates on dividends are lower than income tax rates. Bringing them in line with income tax rates would be one of the less controversial tax rises. Indeed, increases in CGT are widely expected across the board, possibly with relief for investments in UK businesses. Those with second homes and buy-to-let properties might bear a larger burden.
5. Wealth and mansion taxes
Discussions around wealth taxes continue to circulate but would be controversial. Likewise, there has been speculation over ‘mansion tax’ replacing Stamp Duty Land Tax. This would be an annual levy for higher value homes.
Proactive planning: what can you do ahead of the Autumn Budget 2025?
1. Use existing allowances and gift reliefs
For some, it may make sense to make gifts – either through annual gifts or Potentially Exempt Transfers (PETs) – while the current rules apply. However, it’s unclear how existing gifts would be treated if rules change, particularly gifts made within the previous seven years.
2. Consider tax-efficient structures
As the rules around pension savings and Inheritance Tax are due to change in April 2027, many people are already turning to trusts or family investment companies as a way of transferring wealth to the next generation.
In our next article, we explore how Discounted Gift Trusts can be used to reduce Inheritance Tax, with immediate effect. This flexible tool allows you to make a gift into trust but continue to receive ‘income’ during your life.
Alternatively, if you don’t want to give up access to capital, but would like to place future growth outside of your estate, Loan Trusts can be highly effective.
Where there are already trust arrangements in place, it’s important to keep your affairs under review, and ensure they remain effective under new rules.
3. Explore deeds of variation where relevant
Within two years of death, beneficiaries can redirect inheritances (e.g., to trusts), potentially reducing IHT liabilities.
4. Business and Agricultural Property Planning
For those affected by the upcoming agricultural and business property relief changes in April 2026, immediate succession planning is crucial. The window for reorganising ownership structures to maximise remaining reliefs is narrowing. Consider whether it might make sense to make gifts now to benefit from current reliefs.
5. Review your pension strategy
If your focus is on building up pension savings, it makes sense to pay the maximum possible into pensions now – especially if you’re a higher rate taxpayer. If Inheritance Tax planning is your priority, or you may wish to withdraw a lump sum, consider withdrawing or restructuring while current reliefs still stand. But tread carefully as withdrawals can affect retirement income.
6. Other investments
Making full use of your annual ISA allowances is always prudent, particularly if it seems likely that there will be a trimming of other tax breaks.
7. Stay well-informed
A specialist wealth manager, and other professional advisers where appropriate, is well-placed to help you tailor effective strategies — especially around IHT, pensions, and property planning.
Final Thoughts on the Autumn Budget 2025
Uncertainty around potential tax rises is perhaps the greatest obstacle for those planning for the future. The upcoming budget could dramatically change the landscape around investment and financial planning, but being well informed is key to making the best of the situation. For clients with property and other assets, it’s important to consider all options at this early stage, while treading carefully in terms of making any changes.
‘No one should rush into making hasty decisions on the basis of tax,’ cautions Willans. ‘However, now is a good time to review one’s position and objectives, in order to identify if any action should be contemplated.’
The November budget will undoubtedly bring significant changes, but it’s important to remember that tax planning is a long-term endeavour. Professional guidance will help you navigate challenging circumstances and form a robust plan with sufficient flexibility to adapt to events as they evolve.
AJB Wealth can help with all aspects of financial planning and investment management. To discuss your situation, please book an obligation-free consultation, or call us on 01428 774 070.
Important: The content of this bulletin is for general consideration only and does not constitute advice. No action must be taken, or refrained from being taken, without advice. This company accepts no responsibility for any loss occasioned as a result of any such action, or inaction. You are also reminded that investments can fall, as well as rise. And in the event of early encashment, you may receive less back than your original investment.
