Economic pressures have led to increased speculation about possible tax rises in the Autumn Budget on 26 November. It was acknowledged at the UK Labour Party Conference in early October that there may be no other option. There has been widespread speculation about approaches the government could take, but none of the suggestions have been confirmed by the government itself. The simplest and most cost-effective way of increasing tax revenues would be to raise income tax rates. This would result in an almost immediate increase in tax revenues without any additional administrative cost. However, the government remains firm in its pledge not to raise rates of income tax or VAT (although a further extension of the freeze on income tax allowances and thresholds seems very likely).
Much of the more plausible speculation focuses on taxes affecting capital assets and wealth. However, many of these suggestions would take time to generate additional tax revenue, and their effectiveness would depend on how taxpayers respond.
Inheritance tax
Significant changes to the UK inheritance tax (IHT) regime have already been introduced by the current government, including:
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a move away from domicile as a connecting factor for IHT from April 2025 with liability now determined by residence in the UK
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changes to valuable reliefs for business property and agricultural property due to take effect from April 2026 and
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the introduction of IHT on unused pension pots from April 2027.
Despite this, there has been persistent speculation of further possible changes to IHT. In particular, to the current exemption for lifetime gifts to individuals made more than seven years before a person's death. Suggestions include a lifetime cap on tax-free giving, or an increase in the length of time an individual needs to survive for a gift to be tax-free. Any changes of this nature are only likely to affect gifts made on or after the Autumn Budget, with gifts made before then subject to the current rules.
Any changes to IHT that significantly increase its reach are politically sensitive. Only around 5% of all estates pay IHT, yet according to a recent poll, over half the British public would like to see it abolished completely.
Some commentators have suggested that reports of wealthy individuals leaving the UK, mean the government is considering softening the impact of the new IHT regime for individuals and/or trusts. In particular, for trusts that were set-up before the changes were announced (pre-30 October 2024 trusts) or individuals who were already UK resident when the changes came into effect. While changes would be welcome, technical difficulties could arise if changes are now made to the treatment of pre-existing trusts, especially where assets have been distributed out of those trusts since the new rules came into force on 6 April 2025.
Residential property
The UK tax regime for UK residential property has changed almost beyond recognition since 2012 with multiple changes to stamp duty land tax (SDLT), the introduction of the annual tax on enveloped dwellings (ATED) and capital gains tax (CGT) for non-UK residents, together with the imposition of IHT on all interests in UK residential property whether held directly or indirectly. However, it seems that the government may still be looking to property, or at least residential property, to generate further tax revenue. There is speculation around the replacement of SDLT, payable by buyers and so seen as a 'blocker' to the UK housing market, with an annual tax on houses valued at more than a threshold level (potentially set at around £500,000). Another suggestion is the introduction of CGT on the sale of an individual's main or only home where that home is worth more than a certain amount (such as £1.5 million). Under the existing rules, the entire gain realised on the sale of an individual's only or main home (however large) can be exempt from CGT.
Capital gains tax
Rates of CGT were increased in the 2024 Autumn Budget, but it is possible that the government will see a further small increase as a way of generating further tax revenues without the impact being felt by most taxpayers.
Wealth tax
Although there have been calls from some in government and (apparently) strong public support for a wealth tax, the official stance is that this option is not currently under consideration.
