Autumn 2025 Budget Predictions
The UK Autumn Budget for 2025 is scheduled for 26 November, with many anticipating significant developments in taxation and fiscal policy. Chancellor Rachel Reeves is expected to outline Labour’s economic direction following the party’s commitment not to raise taxes on “working people”. As a result, attention has turned to other areas of the tax system that may be targeted for reform or adjustment.
Reeves is rumoured to increase the VAT threshold and introduce Capital Gains Tax on primary residences above a certain threshold.
Freezing tax thresholds:
The current ‘freeze’ of income tax thresholds is set to rise in line with inflation from the 2028/29 tax year; however, there are suggestions of an extension. Although this is not a direct increase in taxes, it is a common point of discussion due to rising wages and other income, such as the state pension. It is often referred to as a ‘stealth tax’, dragging more individuals into paying tax, possibly for the first time and even into the higher rates of tax.
Personal Allowance Reduction:
Currently, the personal allowance of £12,570 is reduced by £1 for every £2 of income above £100,000, phasing out entirely at £125,140. There is speculation that the government may lower the income threshold at which this reduction begins, possibly to £70,000. Such a change would increase tax liabilities for higher earners and could generate additional revenue.
Salary sacrifice arrangements:
Many employees across the country opt for a salary sacrifice for pension contributions or even a vehicle. This has been favoured due to the tax efficiency for both employees and their employers. However there is speculation of changes, potentially removing the opportunity altogether.
National Insurance on Rental Income:
The government is reportedly exploring the introduction of National Insurance contributions on rental income. This proposal would align rental income taxation with other forms of earnings, potentially generating significant revenue. However, it may also impose additional financial burdens on landlords, particularly affecting smaller property investors.
Private residences could be targeted by Reeves’ 2025 budget.
Capital Gains Tax:
Rates for Capital Gains Tax (CGT) were subject to rises in the 2024 Budget; however, the increases were less than many anticipated.
There are several ways the Government could implement a change if this is an area pursued:
Align with income tax rates
Announce a differing rate for separate asset classes
Increasing the rates marginally
Changes to Principal Private Residence (PPR) Relief:
Currently, homeowners can sell their primary residence without incurring CGT, provided they meet certain conditions. However, reports indicate that Chancellor Rachel Reeves is contemplating removing this exemption for properties valued above £1.5 million. Under this proposal, gains from the sale of such homes could be subject to CGT at rates ranging from 18% to 24%, depending on the taxpayer's income level.
VAT Registration Threshold:
Currently, businesses must register for VAT when their taxable turnover exceeds £90,000. Reports indicate that the Chancellor is contemplating raising this threshold to £100,000. This adjustment would alleviate administrative burdens on small businesses and encourage growth by allowing them to expand without the immediate concern of VAT registration. On the other hand, there are rumours of a reduction to the threshold, with suggestions of a £30,000 turnover threshold. This would bring a number of businesses into mandatory VAT registration with various implications.
Preparations for the announcement:
The Autumn 2025 Budget is expected to deliver several impactful measures. Businesses, landlords, and higher earners should prepare for possible adjustments that could influence their financial planning.
Shaw & Co will provide a full breakdown and analysis once the Chancellor delivers the Budget announcement on 26th November.
📞 Contact Shaw & Co today on 01603 975976 with any questions you may have leading up to the announcement on 26th November.