Autumn Budget 2025 preview: possible hikes to Inheritance Tax, pensions, Capital Gains and more

A perfect storm of rising costs and political pressure could prompt the Government to roll out yet more tax hikes in the Autumn Budget. Here’s how to cushion the blow…

Chancellor Rachel Reeves may be relatively new to the job, but she’s already on the cusp of a financial emergency.

According to data from the Office for National Statistics, UK debt stood at 95.5% of annual GDP at the end of April 2025.

What's more, international tensions such as the war in Ukraine are putting increased strain on defence spending, while US President Donald Trump's tariffs are creating further economic uncertainty.

And, in an embarrassing U-turn for the Government, Labour has already flip-flopped on planned changes to the welfare system, such as cuts to Winter Fuel Payments.

Taxpayers to pay the price

Sadly, this state of affairs is likely to have serious consequences for the typical household.

Analysts at research firm Capital Economics suggest that Reeves may need to raise taxes later this year to avoid spooking markets, with Deutsche Bank predicting £10 billion worth of hikes in the Autumn Budget.

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What could be on the horizon?

The Government is in a tricky position: it wants to ramp up revenues but famously pledged last year that it "would not raise taxes on working people", as the screengrab below shows. 

Of course, that pledge won't stop the Government from hiking taxes, as the £40 billion raid in the October 2024 Budget showed. 

This just means it's unlikely to increase Income Tax, thus allowing the Government to claim it technically hasn't targeted "working people".

So, which areas might the chancellor target for a potential tax raid in her next Budget?

Capital Gains Tax (CGT)

As most loveMONEY readers know, you pay CGT when you sell an asset that has risen in value.

At present, Higher Rate taxpayers are charged 24% on residential properties and other valuables.

If you’re in the Basic Rate band, you’ll pay 18% on property and other goods.

However, there have long been calls to hike rates – and this may be on the radar for the chancellor later this year.

How to avoid or cut Capital Gains Tax by using your tax-free allowance, getting an ISA and more

Inheritance Tax (IHT)

Under current rules, all Brits pay IHT on estates worth more than £325,000, with a standard rate of 40%.

However, you can pay a reduced rate of 36% on some assets if you leave 10% or more of the ‘net value’ to charity in your will.

With the Government announcing that pensions will be brought into the IHT allowance from 2027, some worry this levy could be further tightened during the chancellor’s next statement.

Pension tax relief

Most UK residents receive a bonus from the taxman when saving for their twilight years.

At present, you can get tax relief on private pension contributions worth up to 100% of your annual earnings.

In addition, everyone has 20% basic relief automatically added to their personal pension contributions.

This means that, for every £80 you pay into your personal pension, the Government automatically adds £20.

However, Higher and Additional Rate taxpayers may need to fill in a Self-Assessment form to claim the full amount.

That said, rumours are circulating that higher earners could see less generous contributions this Autumn.

Dividend and savings allowances

As most savers know, you may receive a dividend payment if you own shares in a company.

You don’t pay tax on any income that falls within your Personal Allowance (the amount you can earn each year without falling into the hands of HMRC). 

However, allowances were already trimmed in recent Budgets and could be squeezed further.

For example, these brackets have fallen from £2,000 in 2021/22 to £500 in the current tax year.

What you can do now

Although tax changes can have a major impact on your financial life, they often take a while to filter through.

Maximise your ISA allowance: under present rules, you can protect up to £20,000 per year from HMRC.

The ultimate guide to savings: Regular savings accounts, ISAs, instant-access savings accounts, fixed-rate bonds and notice accounts

Make pension contributions sooner: this is especially important if you're a Higher Rate taxpayer, as relief could soon become less generous

Check your Capital Gains: if you’re sitting on profits from shares, crypto or property, consider if it makes sense to realise your profits before any potential rule changes

Review estate plans: if you’re thinking about gifting money or assets, now might be the time to speak to a financial adviser

Have your say

How do you feel about the upcoming UK Budget?

Are you worried for your personal purse? Which taxes particularly concern you?

We’d love to hear your comments below.