Autumn Budget 2025: A stealth tax revolution?

Date

Oct 23, 2025

Author

Matt Knott

Autumn Budget 2025: A stealth tax revolution?

As the UK grapples with mounting fiscal and economic pressures, Chancellor Rachel Reeves is set to deliver a pivotal Budget on November 26th. With government borrowing surging and public finances under strain, this Budget could mark a turning point in how revenue is raised -potentially ushering in a “stealth tax revolution.”

The fiscal backdrop

Government borrowing continues to outpace expectations. In August 2025, borrowing hit £18 billion - the highest for that month in five years. Over the first five months of the fiscal year, total borrowing reached £83.8 billion, up £16.2 billion compared to the same period last year.

This growing fiscal gap - estimated between £30 to £40 billion - poses a significant challenge. While the government has pledged not to raise headline rates of Income Tax, National Insurance, or VAT, alternative revenue-raising strategies are being explored. These could reshape the UK’s tax landscape through less visible, but no less impactful, changes.

What is stealth tax?

Stealth taxes typically exploit wage inflation without adjusting tax thresholds or allowances. As earnings rise but allowances remain frozen, more income becomes taxable - effectively increasing the tax burden without changing rates.

What this could mean for you

When the government borrows more, it often seeks new ways to raise revenue. Even without increases to the main tax rates, this can affect everyday life in several ways.

Higher borrowing can lead to:

Increased taxes in other areas, affecting your income, savings, pensions, or property.
Pressure on public services, potentially reducing funding for healthcare, education, and local initiatives.
Rising interest rates, making mortgages, loans, and credit more expensive.
Market and pension impacts, influencing returns on savings and investments.

Understanding these effects is key to protecting your finances. Reviewing your investments, pensions, and overall financial plans can help reduce risk and keep your wealth secure in a changing economic environment.

Potential tax changes to watch

While the details will be confirmed on Budget Day, the following areas are under discussion and review:

1. Capital Gains Tax (CGT) adjustments

There is speculation that CGT rates may be aligned more closely with income tax rates, potentially increasing the tax burden on the disposal of assets. If you are considering selling investments or property, it may be prudent to review your plans in light of these possible changes.

2. Pension tax relief

Pension contributions continue to attract government attention. In 2022/23, the cost of pension tax relief to the Treasury was around £42.5 billion, with about benefiting higher and additional rate taxpayers.

Possible changes under discussion include:

Moving toward a flat-rate pension tax relief system, which could reduce the relief available to higher earners.
Reducing tax-free cash entitlements from £268,275 to around £100,000, which could affect not only the wealthy but also ordinary savers over time.

It may be beneficial to maximise your pension contributions under current rules before any reforms take effect.

Accessing tax-free cash does not trigger cancellation rights. HMRC have recently confirmed that they do not permit tax-free cash cancellations, so once tax free cash has been withdrawn from a pension it cannot be put back in again.

3. Inheritance Tax (IHT) and gifting

Further changes to Business Relief and Agricultural Relief are being considered, potentially affecting the tax treatment of certain assets passed on to heirs.

Additionally, some proposals suggest extending the period during which gifts remain subject to IHT from seven to ten years. This would mean more estates could be caught within the tax net, even where gifts are made years before death.

Now is the time to review your estate planning strategies to ensure they remain effective under any new rules.

4. Property taxation and a potential Wealth Tax

Property taxation is another area under discussion. Potential measures include:

Adjustments to Stamp Duty Land Tax (SDLT) and other property-related taxes, which could influence the cost of buying and selling property.
Introduction of a Property Wealth Tax, potentially targeting homes valued over £500,000. Treasury studies suggest such a levy could affect more than 1.1 million households, offering a new source of revenue without raising income tax rates.

Discussions around a broader Wealth Tax also continue, which could affect individuals with significant assets. Reviewing your overall wealth management strategy now can help prepare for these potential shifts.

5. Personal allowance

The Personal Allowance, which allows individuals to earn £12,570 tax-free each year, has been frozen since 2021 and is currently set to remain so until 2028. If extended further, this freeze could quietly increase the tax burden for millions.

By 2030, an individual earning £100,000 could face an extra £8,000 in annual tax compared with if allowances had kept pace with inflation - illustrating how “stealth” measures can impact household finances over time.

Preparing for the Budget

In light of these potential changes, proactive financial planning is essential. Consider taking the following steps to protect and strengthen your position:

Review investment plans: Assess the timing of asset disposals and consider the tax implications.
Maximise pension contributions: Take advantage of current pension tax reliefs before any changes are made.
Update estate plans: Ensure your inheritance and gifting strategies remain tax-efficient.
Evaluate property transactions: Consider how potential property tax changes could affect your buying or selling plans.
Plan for income thresholds: Factor in frozen allowances and potential fiscal drag when managing future income.

While acting on speculation can be risky, preparing for multiple outcomes ensures you're not caught flat-footed. It’s about being ready - not reactive.

Source: HMRC (2025) Private pension statistics commentary for 22/23: GOV.UK.