Budget News – What’s Increasing if Income Tax Rates Don’t?

Date: November 20, 2025

First reported in the Financial Times, the latest budget news is that Rachel Reeves will not raise income tax rates in the Budget after better-than-expected forecasts.

The BBC explained that the fiscal outlook is looking better than previously anticipated, with an updated estimate from the OBR stating that the gap in public finances is now close to £20bn, down from previous estimates of £30bn.

With a £20bn deficit still required, this poses the question: what taxes are now likely to rise in the Budget next week?

Alternatives to Rises in Income Tax – What is the Latest Budget news?

Instead of rises in the main income tax rates, it is most likely that the Chancellor will freeze thresholds for another year. Other taxes are also certain to increase, with officials saying tough fiscal choices remain despite the £10bn smaller-than-expected deficit.

Below, we discuss where taxes are most likely to increase in the Budget if Income Tax Doesn’t Rise.

Freezing Income Tax Thresholds

Personal allowances for income tax are expected to be frozen (extended) for another two years beyond 2028, which would raise in the region of £8 billion.

Analysts suggest this “fiscal drag” is the most politically acceptable way to raise revenue without changing headline rates.

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Capital Gains Tax

Potential CGT changes that are being discussed in the mainstream media include removing the primary residence exemption for homes over £1.5 m,

There may also be a 20% “exit tax” on assets for wealthy individuals leaving the UK.

These moves aim to raise revenue but could affect behaviour, with previous rate hikes showing the risk of reduced receipts and market distortions.

Inheritance Tax Discussed in the Latest Budget News

Media reports suggest the Chancellor may extend the seven-year gifting rule to ten years and consider a lifetime cap on tax-free gifts, marking a major shift in inheritance tax planning.

Freezing IHT bands for another year could quietly pull more families into the tax net. Rising house prices and inflation may add £5,000 to £10,000 in tax for the average estate.

The last IHT threshold increase was in 2009; if frozen again, it will be 20 years without a rise, a UK record.

Pension Tax Relief

Possible pension changes include reducing salary sacrifice benefits, cutting the tax-free lump sum, and reforming pension tax relief.

These could weaken incentives to save. From April 2027, unused pension funds will also enter the taxable estate.

Research warns cuts to pension tax relief could remove £50 billion from UK funds over five years, reducing retirement savings and investment and worsening the future pensions crisis.

Salary Sacrifice Cap – Budget News Update

Recent budget news coverage suggests the Chancellor is weighing up a limit of £2,000 a year on the amount employees can put into their pension through salary sacrifice before National Insurance becomes payable.

At the least, this would mean that anything contributed over this level attracts both employer and employee NI.

How Much Tax Will Salary Sacrifice Limits Bring?

It has been reported in financial press that such a restriction could deliver a sizeable windfall for the Treasury. Early estimates put the potential revenue at up to £2 billion a year, with a significant share of that coming from the extra employer NI charges, rather than employees alone.

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Property Tax – Latest Budget News

A significant reform of property tax is under discussion, but probably not in full form this Budget. The latest Budget news suggests that this is likely to include reforming stamp duty land tax and council tax.

Stamp Duty Land Tax

Possible SDLT changes include replacing stamp duty, taxing homes over £500,000 with a new national tax, lowering upfront costs, but potentially creating recurring liabilities. A “mansion tax” may apply CGT on sales above £1.5 m, targeting high-value homeowners.

Second-home SDLT surcharges are expected to remain, whilst transfers of property-rich company shares could face new SDLT charges. Overall, first-time buyers may benefit, but wealthier or older homeowners could see higher costs when selling, and the changes could shift housing market behaviour.

Council Tax

IFS reportedly suggested doubling council tax for Bands G and H, raising bills to about £7,600 and £9,120.

This targets high-value homes and could raise billions, but it seems unlikely. Adding two new upper bands appears more probable, with details expected after the Budget.

ISA limit Cut

Media speculation believes ISA Limits are going to be drastically cut. Current media thinking is that the annual limit for cash ISAs will be reduced from £20,000 to £10,000.

However, the Treasury Select Committee strongly warns against cutting the cash ISA allowance, calling reports of a cut “unlikely to incentivise people to invest.”

Electric Vehicle Tax mentioned in Recent Budget News

There is currently speculation around EV‑tax changes in the Budget, especially focused on how to make EV drivers pay more in the face of declining fuel duty.

Several reports, including the Financial Times, believe the Chancellor may look at introducing a 3p per mile charge on EVs, possibly from 2028, to make up for lost fuel duty revenue.

What Will a 3p Per Mile Tax Mean?

Charging per mile raises questions, including how to measure mileage, how to collect the tax (pre-pay vs after), and how to enforce it.

For a driver with an annual mileage of 15,000 per year, this would equate to an annual cost of £450. When this increases to 20,000 miles, this is £600.

Possible Gambling Tax Hike Reported in the Latest Budget News

Think tanks such as the IPPR and MPs are calling on the Chancellor to raise gambling duties. This includes increasing Remote Gaming Duty and to raise duties on non-racing betting (General Betting Duty).

Horse Racing Duty

Horse racing may be spared the biggest gambling tax hikes, keeping its General Betting Duty at 15%, creating a divide between “skill-based” racing bets and riskier gambling.