As Autumn approaches, all eyes are on the upcoming UK Budget, set for Wednesday 26th November 2025. This time of year always brings with it a flurry of speculation and rumour — sometimes wild, sometimes accurate — about potential tax changes.
While speculation can feel tedious, and whilst completely acknowledging that we, like many others, are adding to the speculation (in pieces such as this), we believe it’s our duty as proactive advisors to share our insights with you. Our goal is to help you stay informed and prepared, so that you are adequately informed to make the right decision for you, your family and business.
We pride ourselves on offering practical, forward-looking tax advice, especially recognising the immeasurable value in this capability and approach during times of change—be it political, economic, or changes to clients’ personal, family, and business situations.
Below, we have set out our thoughts (for you to click through), on the potential changes to be announced in the Budget 2025. Please be mindful all of this is completely speculative on our part and cannot be guaranteed, but it gives you an idea of what we are thinking and expecting, hopefully enabling you to make decisions and seek advice from us. We sincerely hope that you find our expert thoughts informative and useful.
Income Tax
We are expecting an extension of the freeze on income tax bands/thresholds beyond the current April 2028 – albeit this probably needs to be looked at in the context of the fact that the next general election cannot be held later than August 2029!
The longer the freeze continues, and the large impact of “fiscal drag” accumulates, structuring relevant income sources via a limited company may seem more attractive.
National Insurance Contributions (NICs)
NICs being applied to rental property income for individual landlords has been rumoured.
It is difficult to see how this could be applied to rental income received by limited companies – that again may drive landlords to restructuring their investments via limited companies (albeit, incorporating existing rental businesses will likely come at a tax cost that will need to be weighed-up).
Inheritance Tax
A lifetime cap on the value of lifetime gifts has been rumoured – this would be a sizeable change to how the inheritance tax treatment of lifetime gifting has been governed in the past, albeit it is a fixture in some similar taxes on other jurisdictions.
If implemented, such a cap would obviously significantly restrict inheritance tax planning opportunities. Those concerned by such a cap and those considering making lifetime gifts – especially in light of the already announced changes involving restrictions to Business Property Relief, Agricultural Property Relief, and the change to the inheritance tax treatment of pension funds on death (see our article here), may want to consider making gifts before 26 November 2025 (Budget Day).
Another potential change that has been mooted is an increase to the existing 7 year period for lifetime gifting (10 years has been rumoured) – the value of gifts made within the last 7 years of an individual’s life being subject to inheritance tax. Along with other inheritance tax changes (the restrictions to inheritance tax Business Property Relief and Agricultural Property Relief, and the change to the inheritance tax treatment of pension funds on death) this would likely drive earlier decisions around gifting, where other circumstances allowed.
Business Property Relief currently only applies to interests/shares in a business (or assets used in such a business) that is “wholly or mainly” trading – this being a more than 50% training activity test. We have long thought that this test will be narrowed to match the same interpretation test for “trading” for capital gains tax purposes – being a more than 80% trading activity test. Such a change would impact trading business with more than an insignificant investment element and it would be advisable for those holding shares/interests in such businesses to consider mitigation planning.
Pensions
Speculation continues around restrictions/caps on the 25% tax-free amount and on higher-rate income tax relief — although these are regularly floated rumours before any Budget announcement.
Capital Gains Tax (CGT)
Another fairly decent “Budget Speculation Family Fortunes” answer is an increase to capital gains tax rates. I personally still think that capital gains tax rates are ripe for an increase, but I think any increase would be marginal, not to be increased so high as to align with income tax as has been rumoured in certain sections of the media.
One heavily rumoured change is the removal of capital gains ‘Principal Private Residence (PPR)’ relief (often colloquially referred to as “Main Residence Relief”) for gains realised on residential properties exceeding a certain value (c£1.5m has been rumoured). PPR relief costs the Exchequer a significant amount, and therefore I could see this change occurring. However, unless clients are in the process of considering a sale or planning involving their main home (which isn’t generally advisable in many circumstances), planning opportunities are limited.
One change that I predicted would be made in the Budget 2024 was the removal of the capital gains base cost uplift to the probate value (the market value of the asset at the date of the deceased’s death) for inherited assets that qualified for inheritance tax reliefs/exemptions. Where assets have been inherited and a sizeable capital gain wiped out on the deceased’s death, the beneficiaries may consider options to attempt to “bank” that high base cost.
Companies and trusts are generally subject to a capital gains tax charge (a so-called “exit charge”) when they become non-UK tax resident. A similar tax charge (effectively subjecting unrealised gains to capital gains tax when an individual becomes non-UK tax resident) has been rumoured. I could see this being implemented. Those considering leaving the UK in the near future should seek advice.
Property Taxes
Whilst no such tax exists, I have grouped some relevant taxes to property together.
There is speculation that Stamp Duty Land Tax (SDLT) could be scrapped and replaced with a seller’s tax. This would be incredibly difficult to implement smoothly and risks causing market disruption.
Other possibilities include:
- A new annual property tax on homes above £1.5m
- Council tax reform has been rumoured, which quite frankly, is long overdue – it’s been rumoured that such a reform would involve aligning council tax banding to current values.
Wealth Tax
There have been many calls for a “wealth tax” by various organisations. I personally don’t see such a tax being implemented, albeit I think the government will use this as a principle within the existing tax system e.g. the removal of capital gains PPR relief for homes of certain value etc.
VAT
A reduction in the VAT registration threshold from the current £90,000 turnover threshold in any rolling 12-month period has been suggested. This isn’t necessarily new and is one of those high scoring “Budget Speculation Pointless” answers. However, I do think that this is possible. There are schools of thought that the current threshold is too high and stifles growth. Equally, there are rumours that the threshold will be increased to something like £100,000.
There’s limited scope for planning here, but businesses will need to review the impact of any threshold change carefully.
Our Closing Thoughts
We know that the volatility in the tax landscape is worrying and disconcerting for clients. But please know that, as always, we are here to discuss your thoughts and to provide proactive, practical advice when you need it. Please don’t hesitate to reach out.
