As the country awaits the Autumn Budget next week, households and businesses alike are awaiting decisions that could reshape the UK’s tax landscape for years to come. With the Government facing intense pressure to stabilise public finances while stimulating growth, recent Office for Budget Responsibility (OBR) assessments indicate a slightly stronger economic outlook, which has eased some of the earlier fiscal concerns. Speculation is still however mounting across multiple fronts; from VAT and income tax to pensions, partnerships and property.
What unites these areas is a shared tension between fiscal necessity and economic resilience. Each potential policy shift carries consequences that could ripple through the economy: small businesses already under strain may face higher costs; individuals could see their disposable income squeezed and uncertainty around long-term savings and retirement planning; with those of high net worth potentially reviewing where they live and do business internationally; and both the property market and professional partnerships are navigating the risk of structural change.
Tax changes also impact the market – and in turn people’s living costs and borrowing costs – as the suggested income tax rise shelving has proved, with the Pound weakening and the cost of Government borrowing increasing. The Chancellor has a difficult path to tread, between going far enough to satisfy markets and not going too far to upset an already disgruntled electorate.
Taken together, these issues highlight the need for a Budget that prioritises stability, clarity, and a long-term approach—avoiding short-term revenue grabs that ultimately undermine confidence, investment and growth in the UK.
VAT
A VAT rise in the Autumn Budget would hit small businesses the hardest. Businesses below the VAT threshold and not registered for VAT do not charge it on their sales, but they still pay VAT on the stock they buy and potentially on their rent. If the rate goes up, those input costs rise immediately, and suppliers are unlikely to sacrifice margin to soften the blow. VAT registered businesses can usually reclaim VAT, giving them more protection, while non-VAT registered businesses cannot (unless they chose to register) so the impact falls more sharply on them.
Service-led sectors are particularly exposed. Restaurants and caterers already operate on extremely tight margins and must charge 20% on dining and catering, even though the food itself is often zero-rated. With 60,000 small business at risk, a further VAT rise would almost certainly push more operators out of business, or compel them to VAT register, increasing their prices. Healthcare, charities, insurance and other VAT-exempt sectors will also suffer because they cannot reclaim VAT on their costs at all. Any increase therefore goes straight into their operating cost base, and ultimately into higher prices for customers.
As a result, we anticipate that rather than raising the VAT rate, it is more likely that the VAT threshold will be reduced from the current £90,000. This would bring VAT more in line with other European sales taxes and remove the cliff-edge that can encourage small businesses and sole traders to artificially limit their growth.
Income Tax
A rise in income tax is no longer on the table for the Autumn Budget, in line with Labour’s manifesto pledge. Instead, another option now under consideration is to extend the freeze on income tax thresholds beyond 2028, which the Resolution Foundation estimates could raise around £7.5 billion, as wages and pensions rise while thresholds remain fixed.
This option would allow the Government to raise significant revenue through fiscal drag as wages continue to rise. Improved economic forecasts from the OBR have eased some of the pressure to increase headline rates, but a threshold freeze would still be felt across households and businesses. More people would be drawn into higher tax bands or into paying income tax altogether, while businesses particularly SMEs could face indirect pressures if disposable incomes tighten and wage demands increase.
It remains to be seen whether markets will be satisfied on the promise of future tax revenues, rather than action now.
Pensions
It is possible that this year’s Autumn Budget brings some much-needed clarity from the Government on pension taxation to end the uncertainty that is driving savers to make hasty, potentially damaging decisions about their retirement funds.
Ideally, the Government should commit to stability in the current system and reinforce confidence that pensions are the best long-term savings vehicle for retirement by protecting tax relief at marginal rate and preserving salary sacrifice arrangements that benefit both employers and employees.
We understand that the Government needs to balance public finances, but constant modification to pension rules erodes trust and makes effective financial planning nearly impossible. What savers need most from this budget is reassurance and a commitment to long-term stability, along with any necessary transitional protections for existing pension holders.
Read more on potential pension changes.
International Personal Taxation
Following the significant reforms to how foreign nationals are taxed in the UK, including the abolition of the non-domicile’s ‘Remittance Basis’ last year, which lead to a significant departure of taxpayers from the UK, a key area of concern for those who remained is the speculation around the introduction of a new ‘settling-up’ tax. The mooted tax, as proposed, would apply a 20% tax liability on a deemed disposition of assets, when an individual ceases to be a UK tax resident.
While other G7 nations have similar measures, an ‘overnight’ introduction in the UK seems unlikely – due to the inherent complexity involved.
The complications of such a tax are not limited to the interaction with other UK taxes, such as Inheritance Tax, but could also have very significant implications for the operation of the UK’s extensive Double Tax Agreement network, potentially creating ‘double tax’ exposure for those caught by the regime. Although the objective of an ‘exit’ tax is to discourage those from leaving the UK, the practical effect is likely that it would severely damage the UK’s appeal as a place to relocate to in the first place, rather than simply deterring departures. The consequences of which is likely to reduce the UK tax revenue over the long term.
An additional area of speculation, though considered less likely in the near term, is the introduction of a US-style citizenship-based taxation system. This form of taxation, which subjects citizens to tax on worldwide income regardless of where they live, is unusual outside the US, however other countries are considering adopting a similar, albeit time limited, regime. Notwithstanding, given the current strains on HMRC resources, the enormous compliance and enforcement task of taxing all UK citizens abroad, for what would likely result in minimal net revenue, seems highly impractical and unlikely to a measure we see in the UK in the foreseeable future.
To encourage UK investment, the Government could explore an extension of Business Investment Relief, which would allow individuals to invest foreign income and gains into UK investments such as GILTs, without triggering a taxable remittance. A scheme such as this could be seen as an attractive alternative to the relatively unpopular Temporary Repatriation Facility (TRF) which came into effect in April 2025. There is no easy solution, but the government must adopt more innovative approach to taxation, rather than simply imposing more taxes.
Capital Gains Tax
Profits on the sale of an individual’s main residence currently qualify for relief from capital gains tax, which would otherwise be payable at rates of up to 24%. If the Government restricts this relief on high-value properties (ie those worth more than £1.5million), it would represent a fundamental departure from decades of settled tax policy that has protected the family home, potentially affecting 120,000 taxpayers and discouraging downsizing that could free up family housing stock as the country faces a critical housing shortage.
It could also create a ‘cliff-edge’ effect in the market, depending on how such a tax would be introduced and this could have a depressive effect on house prices overall.
High Value Property Tax
By contrast, a tax applied to high value properties, often dubbed a ‘mansion tax’, could accelerate downsizing, particularly amongst pensioners whose incomes have decreased while their property values have increased. However, property value alone does not necessarily reflect an individual’s wealth or financial liquidity, and introducing a tax at the top of the market could not only depress property values, but also the appetite of potential buyers unwilling to absorb an annual tax bill, as well as limit options for those seeking to downsize.
The alternative, as has been suggested, is the introduction of more council tax bands at the upper levels to increase the cost. This would seem most likely of all of the property tax changes mooted.
Stamp Duty and Land Tax
Any changes to what is essentially a transaction-based tax will inevitably result in an accelerated or frozen housing market. Reforms to SDLT must be phased in gradually with appropriate transitional protections, rather than creating bottle necks and worsening Britain’s housing supply challenges.
Read more on potential property tax reforms.
Limited Liability Partnerships
There has been speculation that the 2025 Autumn Budget might look to introduce Employer’s National Insurance contributions (NICs) on partnership profits, including those from limited liability partnerships.
It is key that any policy that looks to introduce NICs on partnership profits recognises the fundamental differences between partners and employees. Unlike employees, partners are materially invested in their businesses with their own capital at risk, and their taxable profits often significantly exceed what they can actually draw due to working capital requirements. As a result, an NICs charge on profits as opposed to drawings would be financially punitive.
Read more on how a potential new National Insurance charge could apply to Members of LLPs
Across VAT, income tax, pensions, international taxes, property and partnerships, one message is consistent: stability matters. Businesses and individuals can adapt to change, but only when reforms are proportionate, clearly signposted, and accompanied by adequate transitional protections. Sudden increases in tax burdens—whether through rate rises, threshold freezes or new forms of taxation—risk stifling growth at a time when the UK economy most needs momentum.
Instead, the Autumn Budget presents an opportunity for the Government to restore confidence by committing to clarity in pension policy, designing intelligent tax measures that reflect economic realities, and pursuing property reform that supports rather than distorts the housing market. By striking the right balance between revenue generation and long-term economic health, this Budget could set the foundation for a more resilient and dynamic future—giving taxpayers, businesses and investors the certainty they urgently need.
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