What could be in store? A preview of the UK’s November Budget

Anticipation is building around the first full-term Autumn Budget to be delivered by Chancellor Rachel Reeves in November 2025.

The Labour government continues to stress that it will not raise the three headline taxes on “working people” – income tax, National Insurance contributions and VAT – yet the Office for Budget Responsibility (OBR) forecasts a structural deficit that must be reconciled with the party’s fiscal rules on borrowing and debt.

Against that backdrop, attention is turning to the parts of the tax code that have not been explicitly ring-fenced. The political mood music suggests that the Treasury’s search for revenue is likely to focus on wealth, capital and property, rather than earned income, although officials remain acutely aware of the risk of deterring investment at a delicate point in the economic cycle.

Here is an overview of measures which may well be reviewed, the rationale behind these potential changes and the impact they may have.

Capital gains tax

Capital gains tax (CGT) remains the most obvious candidate for further change.

At the March 2025 Spring Statement, the Chancellor surprised few observers by lifting the lower residential rate from 10 per cent to 18 per cent and the higher rate from 20 per cent to 24 per cent, a move that the Treasury estimated would raise just over £2bn a year by 2028.

Nevertheless, because CGT still enjoys significantly lower headline rates than income tax, there is scope, political and fiscal, for an additional turn of the screw.

One option being mooted inside the Treasury would be to extend the 24 per cent rate to 28 per cent, thereby aligning it with the pre-2020 higher residential property rate; another would involve a more nuanced rate card that differentiates between listed securities, business assets and second homes. The Chancellor could also look to target transfers between spouses (including civil partners) which rebases property for CGT purposes, wiping out an element of gain from being chargeable to CGT.

Treasury officials are also studying the behavioural effects of shaving the annual exempt amount even further, notwithstanding the fact that it has already been cut from £12,300 in 2022/23 to £3,000 from April 2024. In practice, a further reduction would add administrative cost for taxpayers and HMRC alike while raising only modest sums, so the Chancellor may prefer a clean rate rise combined with a new relief for investment in UK-incorporated trading companies.

Regardless of the precise mechanism chosen, a fresh CGT measure in November would chime with the government’s stated desire to target unearned gains rather than labour.

Inheritance tax

Inheritance tax (IHT) also appears to be high on the Chancellor’s list.

IHT has long generated more political heat than fiscal light, the tax raises little more than £7bn a year, yet polling consistently shows that a majority of the electorate believes it should be paid by the “very wealthy”. For that reason, officials think the public could accept reforms that restrict the ability of families to transmit large sums free of tax during their lifetime.

Two specific ideas are circulating.

First, the Treasury is exploring the introduction of a cumulative lifetime gifts allowance (CLGA), whereby each individual could give, say, £250,000 over their lifetime without triggering an immediate IHT charge, beyond which gifts would be taxed at 20 percent on a sliding scale.

Second, the current seven-year taper that creates potentially exempt transfers (PETs) if the donor survives the gift by more than seven years may be either lengthened to ten years or replaced with a fixed charge based on the size of the gift rather than the survival period.

Modelling by HMRC suggests that tightening lifetime gifting rules could raise close to £1bn a year within five years, though the measure would need generous transitional provisions to avoid penalising gifts already planned under the existing rules.

Property taxation

Property taxation is another field ripe for reform, and perhaps the area in which the Chancellor could produce the most headline-grabbing changes.

The government has distanced itself from a full-blown annual wealth tax, citing administrative complexity and uncertain yield, yet it is clearly interested in taxing wealth that is both immobile and relatively simple to value, namely residential property. Three strands of policy development are evident.

First, work has continued on a re-banding of council tax. Current bands are based on April 1991 property values in England and Scotland (or April 2003 in Wales) and bear little resemblance to contemporary market prices. As a result, a family in a £4m London townhouse can pay the same council tax as someone living in a property worth less than a tenth of that amount.

The Department for Levelling Up, Housing and Communities has prepared options for two additional bands at the top end (perhaps a Band H+ and Band I), but the more radical proposal, still on the table, would be to scrap council tax altogether and replace it with an annual property tax set as a flat percentage of an up-to-date market value.

Officials accept that this would require a full national re-valuation, significant IT investment and a lengthy consultation; therefore, it is unlikely to be implemented before 2029, but an enabling bill could be announced this autumn to start the process.

Second, the Treasury is examining ways to recast or partly replace Stamp Duty Land Tax (SDLT).

SDLT receipts have become increasingly volatile, falling sharply during market downturns and spiking in response to temporary reliefs. One technical fix under review would shift the liability from buyer to seller, at least for properties above £1m, on the basis that sellers typically crystallise a gain and are therefore better placed to meet the charge.

A more sweeping alternative, which enjoys some support among backbenchers, would abolish SDLT and fold it into the new annual property tax, thereby removing the transactional friction that economists argue depresses labour mobility and constrains downsizing. Whether the Treasury can forgo the immediate cash-flow benefits of SDLT, forecast at £16bn in 2025/26, remains to be seen.

Third, there is increasing talk of limiting private residence relief on capital gains. A leading proposal would impose CGT on gains realised on a main home where the sale price exceeds £1.5m, thereby creating a de-facto “mansion tax” without levying an annual charge.

The threshold could be indexed to average house prices or set at a fixed percentile of the national market so that it captures broadly the top five per cent of transactions.

Because the policy would bite only on disposal, it would sit comfortably with HMRC’s existing compliance infrastructure, though critics argue it could deter elderly homeowners from downsizing, and that it blurs the long-standing distinction between a primary residence and an investment asset.

Pensions

The pension system is another area in the Chancellor’s sights, both as a revenue source and as part of a broader agenda to encourage productive investment.

The most eye-catching idea is a reduction in the tax-free pension commencement lump sum (PCLS). Since 2006, individuals have generally been entitled to take up to 25 per cent of their accrued pension benefits free of tax, but the monetary cap has been frozen at £268,275.

Treasury officials have mapped out three scenarios: freezing the cap again (a stealth cut given wage inflation), cutting it to £200,000, or slicing it to £150,000 while earmarking a proportion of the yield for new public-private infrastructure funds. Each option would raise several hundred million pounds annually; however, the Chancellor is acutely aware that sudden changes to pension rules risk undermining saver confidence, so any reform is likely to apply prospectively or come with a multi-year grace period.

In parallel, the Treasury has revisited the lucrative but controversial practice of salary sacrifice for employee pension contributions. At present, by exchanging part of gross salary for an employer pension contribution, an employee can avoid both employee and employer NICs on the sacrificed amount.

The Office for Tax Simplification previously recommended capping the level of salary sacrifice or bringing employer contributions within the scope of employee NICs above a certain threshold. The Chancellor is reportedly leaning toward restricting the NICs advantage to, for example, £5,000 per employee per year, a change that would produce an estimated £1.3bn in combined NICs annually.

Frozen allowances

Fiscal drag generated by the government’s decision to freeze income tax and NIC thresholds until 2028 has proved an unexpectedly rich seam.

Extending the freeze by a further two years to April 2030 would yield roughly £8bn a year, more than any single discreet tax rise currently under discussion.

While a threshold freeze does not violate the letter of the government’s pledge not to raise income tax or NICs rates, critics argue that it breaches the spirit of that promise by pushing millions into higher bands. The Chancellor is therefore weighing whether to soften the political optics by raising thresholds in line with the consumer-prices index for lower-income earners while retaining the freeze for higher-rate bands.

Wealth tax

Calls for a formal wealth tax persist, amplified by think-tanks such as the Institute for Public Policy Research and the Resolution Foundation, which advocate a one-off one per cent levy on individual wealth above £10m.

Ministers have repeatedly ruled out such a measure, citing administrative complexity, valuation disputes and the flight of mobile capital. Internal briefing suggests that the

Chancellor views an annual wealth tax as a “blunt instrument” that would deliver at best £8 -10bn net after avoidance and compliance costs. By contrast, a targeted package of CGT, IHT, property and pensions reforms, alongside the continuation of fiscal drag, is projected to raise a similar sum with fewer distortionary side effects.

Closing reflections on the November Budget forecast

Taken together, the possible measures outlined above reveal a coherent, if politically delicate, strategy: recast the tax system so that a larger share of the burden falls on accumulated wealth and passive gains rather than on earned income.

Such a shift would align the UK more closely with the tax mix in a number of OECD peers without crossing Labour’s self-imposed red lines. Yet each proposal carries real-world consequences.

Higher CGT may discourage entrepreneurial risk-taking unless balanced by robust relief for genuine business investment.

Tougher IHT rules could accelerate the surge in lifetime gifting ahead of implementation, complicating HMRC’s task.

A property-value-based council tax or SDLT reform might correct obvious inequities but risks sharp regional variations in household tax bills unless a comprehensive equalisation mechanism is put in place.

Any reduction in the PCLS or curtailment of salary sacrifice must be weighed against the government’s ambition to deepen domestic pools of long-term capital.

Estate-planning strategies that rely on the seven-year IHT taper or successive use of the CGT annual exemption may need urgent review.

Property investors and homeowners in high-value areas should model the impact of a potential CGT charge on main residences and budget for higher recurrent property levies. Pension savers approaching retirement may wish to bring forward crystallisation to lock in the existing 25 per cent lump-sum rule, while employers might revisit remuneration structures in anticipation of tighter salary-sacrifice limits.

Ultimately, the Chancellor’s fiscal arithmetic leaves little room for complacency. With public services under acute pressure, debt-service costs elevated and the government committed to a path of net-zero transition and industrial renewal, the tax system will have to do more heavy lifting.

Whether Rachel Reeves opts for bold structural reform or a series of incremental adjustments, November 2025 seems poised to herald the most significant shift in UK tax policy since the coalition era.

If the government’s direction of travel is clear, taxing wealth and assets rather than income, the precise destination will be mapped out in the Budget Red Book. Stakeholders would therefore be well advised to scenario-plan now, ensuring that they are ready to respond quickly when the Chancellor finally lifts the curtain on the details this autumn.