On Wednesday 26th November, Chancellor of the Exchequer Rachel Reeves will announce the Autumn Budget. This is a statement of the state of the UK economy, along with tax, borrowing and spending plans for over the next year.

In a pre-Budget speech, the Chancellor announced that “each of us must do our bit for the security of our country”. This has fuelled speculation about the policies that may be introduced in the Budget to raise much-needed funds for the government. An added complication for Reeves is the Labour manifesto promise not to increase income tax, National Insurance or VAT for working people, in order to boost the economy.

In this article, we’ll discuss the speculation surrounding policy areas including pensions, ISAs, and taxes including dividend tax and property tax. It should be stressed that this is simply speculation until the Budget is announced. We would recommend not making financial decisions with onward implications based on speculation alone.

Pensions

Pensions Commission

The government has signalled their intention to look at the efficiency and effectiveness of the current pension system. They have revived the Pensions Commission to explore what is preventing workers from saving sufficiently into retirement pots. Recommendations will also be made for future-proofing the pensions system. You can find out more about the Commissions objectives in our blog post from earlier in the year.

The affordability of the State Pension Triple Lock could be looked into by the Commission. Both Labour and the Conservatives made manifesto pledges to maintain the Triple Lock. This will ensure pensioners are receiving an increase in State Pension in line with average earnings growth, inflation or 2.5%, whichever is greater. However there have been concerns that continuing this promise will not be affordable in the long-term.

Workplace pension auto-enrolment

The government may look to expand eligibility for auto-enrolment into workplace pensions, to include the self-employed. Reeves may also announce a change to salary sacrifice schemes including workplace pensions. She may limit the amount that can be paid into a workplace pension without National Insurance being due. Whilst there is no limit currently in place, this could be a way to raise additional funds for the government.

Tax-free lump sum

An area of great speculation regarding pensions is the lowering of the tax-free lump sum for withdrawals. This is currently set at 25% of the pension pot value, capped for most people at £268,275. Read more about this area of speculation in our recent Speculation Spotlight blog post.

Tax relief on pension contributions

Alternatively, Reeves may choose to reduce the higher rate of tax relief on pension contributions. Currently basic rate taxpayers receive 20% tax relief on pension contributions. Higher and additional rate taxpayers are able to receive 40% and 45% tax relief respectively. There is speculation that Reeves could simplify this with a single flat-rate of tax relief. This would be beneficial to basic rate taxpayers, but would hit the pockets of higher and additional rate taxpayers.

ISAs

Since the summer, speculation has been rife about changes to cash ISAs being announced. Currently £20,000 may be invested per adult per year across both a cash ISA and a Stocks and Shares ISA. In a bid to encourage individuals to invest in Stocks and Shares ISAs over saving in cash ISAs, Reeves may choose to reduce the allowance for cash ISAs.

In July, the Chancellor suggested that changes to ISAs were being postponed for the time being. This was due to concerns and backlash from a number of parties. She said she was continuing to consider changes to ISAs, with wider engagement on the matter planned over coming months. The Autumn Budget may herald an announcement on this, or a decision may be pushed back further.

Income tax

Arguably the biggest talking point about the upcoming Budget has been surrounding income tax. Despite the Labour Party making a manifesto pledge not to raise income tax, National Insurance or VAT for working people, statements from the government have suggested over recent months that they may need to break this pledge.

Until the last week, including during her pre-Budget speech, Chancellor Reeves indicated this may be the case. She is said to have been considering a 2p rise to income tax rates, with a 2p fall in employees’ National Insurance. This “2 up, 2 down” scenario would effectively make no difference to working people. It would, however, raise income for the government through non-work income. In recent days, the Office for Budget Responsibility (OBR) has conducted new assessments that have lessened the gap between government spending and income. It is therefore now thought that Reeves will not need to break the manifesto pledge directly in this way.

Reeves may, however, still implement a stealth tax rise, by extending the freeze on income tax thresholds, beyond April 2028. As it stands, the tax thresholds will rise in line with inflation from this time. This will mean more take-home pay for workers. However by extending the thresholds freeze for longer, more workers will fall into higher tax thresholds as they receive pay rises or through inflation. This will generate more income for the government without technically raising income tax rates.

Property tax

There is speculation that the Chancellor may introduce an overhaul of property tax. Stamp duty tax is a key concern for potential homebuyers. In a bid to boost the housing market, Reeves may choose to spread stamp duty over a number of years, rather than it be due at the point of sale.

Some commentators are also speculating that Capital Gains tax may be introduced on primary residences. Currently this is only applicable on additional properties.

Dividends tax

If you hold shares in a company you may be eligible to receive dividends from the company. There is currently a tax-free dividend limit of £500 per financial year. After this, dividends are taxed depending on your tax band: basic, higher or additional. Dividends are taxed at 8.75%, 33.75% and 39.35% respectively. In the Budget, the Chancellor may choose to lower the tax-free limit. Alternatively, she may choose to increase the amount of tax due after this threshold has been reached, for each tax band.

Inheritance Tax

It was announced in the 2024 Autumn Budget that inherited pensions will be subject to inheritance tax (IHT) from April 2027. This means it will be included in the estate value of the deceased. If this brings the value of the estate to more than £325,000, IHT will be due. Last Autumn, the Chancellor froze the threshold for paying IHT for two further years until 2030. There is speculation that this may be further extended in this year’s Autumn Budget.

Currently, IHT is due on any financial gifts given within seven years of an individual passing away. There is speculation that the Chancellor may increase the number of years between gifting and the individual passing away in this Budget. This could add more to the deceased’s estate value, leading to more estates owing IHT. Alternatively there may be a lifetime cap on the value of gifts that can be given imposed by Reeves.

National Insurance for landlords

There has been some speculation that landlords could be subject to greater taxes. This may include being required to pay National Insurance on income from rental properties. Currently this income is subject to income tax but not typically National Insurance. This is due to the fact it’s usually considered as investment income rather than ‘earned income’.

When will be know what’s been announced?

The Budget will be announced on Wednesday 26th November. It is usually read in Parliament after Prime Minister’s Questions, at around 12.30pm. Keep an eye on our blog on the day, for a breakdown of announcements and what they mean for you!