On 26 November 2025, Chancellor Rachel Reeves will deliver her Autumn Budget as Labour seeks to balance growth ambitions with a fiscal gap estimated between £20m - £40 billion.
The government has promised a Budget focused on “delivering for working people” through renewal and reform. Yet behind the optimism lies the challenge of raising revenue without breaking its manifesto commitments not to increase Income Tax, National Insurance (NICs), or VAT.
Speaking ahead of the Budget, Reeves told the BBC that whilst it was possible to stick with the manifesto commitments, it “would require deep cuts to capital spending."
This has fuelled speculation about where the Chancellor might look for alternative mechanisms - for example, rebalancing Income Tax and NICs to shift the burden without breaching those promises.
Income Tax and National Insurance - The Balancing Act
Half a century has passed since a Chancellor last raised the basic rate of Income Tax. With limited fiscal headroom, some commentators suggest Reeves could consider a 2p increase in Income Tax, offset by an equivalent 2p reduction in NICs.
Such a move would be politically sensitive but could be argued by the Chancellor, that Labour isn’t breaking its manifesto promise to "working people” whilst also generating funds from groups such as landlords, investors, and pensioners not subject to NICs.
Even without headline rate changes, the continued freezing of tax bands remains one of the Treasury’s most effective tools for increasing receipts - as inflation and wage growth push more taxpayers into higher bands. This “fiscal drag” effect has already significantly boosted revenues and could remain in place for several more years.
Pensions - Will Reliefs Come Under Review?
Pension tax relief is a recurring topic before each Budget, and this year is no different. Reform has long been viewed as a potential source of additional revenue, though politically risky given the importance of encouraging long-term saving.
Speculation includes:
Reducing higher-rate relief on contributions to a flat rate
Revisiting the 25% tax-free lump sum, which has remained unchanged for decades
Restricting salary sacrifice arrangements that currently deliver NIC efficiencies for both employers and employees
Capital Gains Tax and Inheritance Tax - Revisiting the Edges
The previous Budget addressed several aspects of Capital Gains Tax (CGT) and Inheritance Tax (IHT), yet there remain areas open to adjustment. Possible measures could include:
A cap on lifetime gifts to limit large-scale transfers made outside the IHT net
A CGT exit charge on individuals who change tax residence to mitigate perceived avoidance
While no clear signals have been given, both taxes remain under scrutiny as part of the government’s drive for fairness and fiscal sustainability.
What Happens Next
Dains will be analysing the announcements in full and hosting a series of post-Budget insight events to provide practical clarity on what the measures mean in real terms for individuals and businesses.
