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Speculation suggests the Chancellor will seek to raise £20-£30 billion through new tax measures.
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Our clients are particularly concerned that the pension tax-free lump sum or inheritance tax (IHT) allowances might be cut.
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It’s hard to foresee what might could happen, but you might choose to accelerate actions you’re already planning.
Ahead of Rachel Reeves’ Autumn Budget on 26 November 2025, it’s hard to predict which taxes she’ll raise. Speculation has been mounting, that she may introduce some significant tax increases, which could affect people with assets and investments.
The UK Chancellor is in an unenviable position. Faced with sluggish economic growth and upward pressures on public spending, she might need to find an extra £20-£30 billion in new tax measures, depending on which economist or think tank you read.
What might happen is an emotive topic for our clients. We can’t provide advice purely on the basis of speculation and rumours about the measures that might be introduced. However, those clients who were thinking of taking advantage of allowances that might be targeted could consider acting before the Budget if they can.
Possible tax measures
So, let’s start with what might happen. Over the past few months, there’s been chatter in policy circles about tax measures to do with wealth, property, capital, business and ‘stealth’ areas.
Some voices inside Labour have pushed for a wealth tax and there’s been speculation that property taxes could be revisited, with reform of stamp duty land tax and higher council tax rates or even a ‘mansion tax’. There has also been speculation that IHT allowances might become less generous, with tighter rules on lifetime gifts.
A possibility that’s drawn particular attention is lowering the tax-free lump sum that can be withdrawn from pensions. Currently, 25% from most pension schemes can be withdrawn without tax, up to a maximum of £268,275.
Recently, the Resolution Foundation think-tank made an entirely different proposal, urging Reeves to increase income tax by 2%, but also reduce the rate of employee national insurance by the same amount, saying this would raise £6bn a year for the Treasury. While politically hazardous, the measures would shift the tax burden away from workers and on to pensioners, landlords and the self-employed.
Our clients’ concerns
Of all these options, the one that is likely concerning our clients most is the possibility of changes to the pensions tax free lump sum. Our view is if you have been planning to take the lump sum anyway, it might be wise to consider doing so before the Budget.
Similarly, there’s a possibility that the Budget might reduce the level of tax relief for high earners saving into a pension. Again, our advice has to do with timing rather than making any wholesale change on the basis of speculation. If you’re making contributions and if you are able to do so, it’s potentially a good idea to accelerate them ahead of the Budget.
Another area of concern for clients is IHT. There might be changes to the ‘seven-year’ rule that allows people to make a gift to inheritors, who won’t have to pay any tax providing you survive the gift by seven years. If you don’t live that long, the rate of tax is tapered from year three to seven. Without this relief, inheritance tax is levied at a rate of 40% above the nil rate band threshold of £325,000 per individual.
Once again, if you’re planning to make a gift of an asset it could be prudent to do so before 26 November. There’s no knowing whether the Treasury plans any changes, but it’s possible the current seven years could be stretched out to 10 years, or a lifetime cap be placed on the amount anyone can give under the rule. It does no harm to assess your plans.
One attractive option which many of our clients are discussing is the option of Life Insurance Policies to offset any IHT liability. This doesn’t necessarily protect you from any changes in the upcoming budget, but if you have an IHT liability now, it is a simple way to cover this without having to make gifts if it is not an optimal time to do so.
Talk to us
It’s an uncertain time for wealth owners, just a year on from the 2024 Autumn Budget that introduced measures affecting wealth planning, including increases in capital gains tax, bringing pensions within the scope of inheritance tax and limiting the tax relief on AIM shares.
2024’s Budget was especially relevant for business owners and farmers, with changes limiting the scope of business property relief and agricultural property relief.
Suggestions from think tanks is that 2025’s Budget could be as consequential. This period presents an opportunity for individuals to assess their position and consider how potential reform could impact them.
Following the Budget on 26 November, we will spend time to understand how it could impact you, based on our understanding of your personal circumstances and financial goals.
Brown Shipley takes great pride in delivering comprehensive support to its clients, across our core services of Investment Management, Wealth Planning and Lending. Should you have any concerns following the announcement, please speak with one of our experienced Client Advisors for assistance.
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Information correct as of 7 October 2025.
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