What is likely to happen in the 2025 Budget?
The Budget takes place on 26 November, later than originally planned, suggesting that more time was needed to pull together plans and proposals, writes James Geary of Randall & Payne.
The 2025 Budget will take place on 26 November, considerably later than originally envisaged, suggesting that more time was needed to pull together plans and proposals. There is little doubt, therefore, that we can expect a Budget packed with changes and possibly a few surprises.
The Budget comes on the back of another low-growth year although the economy has remained stubbornly just short of an official recession.
We are seeing a lot of optimism from the business community about prospects for the economy. However, it is clear that the government badly needs to either raise taxes, cut costs, or more likely a combination of both.
As ever, there has been a considerable amount of speculation in the past few weeks, and we have pulled together the main areas where we could see changes.
Income Tax and National Insurance
The obvious area is a continued freeze on the personal allowances and rate thresholds. The current freeze is due to end in 2028 but is likely to be extended to 2030. This “fiscal drag” effect would likely bring in an additional £10 billion each year. The negative effects include dragging even more pensioners into tax as their State Pensions will shortly overtake the personal tax allowance.
Other areas where we could see changes:
Increase in National Insurance for LLPs – potentially to align the current lower Class 4 rate with the employee’s 12 per cent rate – or even more extreme, introducing Employer’s NIC at 15 per cent on partners’ profit shares.
Introduction of NIC on rental income to align with self-employed profits.
Increase in dividend rates of Income Tax
Inheritance Tax
A lot of speculation means this tax is bound to feature somewhere. This tax raised a record £4.4 billion in the first half of 2025 and the receipts are increasing constantly with the frozen nil rate band. Areas where we could see changes here:
Continuing the freeze on the nil rate band at £325,000
Reducing the main residence nil rate band
Tightening the various IHT reliefs – such as gifts out of surplus income and annual exemptions, or even extending the period for lifetime gifts to fall outside of the death estate from 7 to 10 years.
Pensions
This is a constant target for tax rises and may well feature again. We already have the prospect of surplus pension pots being liable to Inheritance Tax from 2027. Other areas that could be targeted include:
Restrictions on salary sacrifice arrangements for pension contributions.
Introducing a small annual fund levy (perhaps 0.5 per cent)
Capital Gains Tax
While there is constant speculation that rates could be increased to align with Income Tax rates, we do consider this unlikely as this is likely to discourage investment activity and may well actually reduce tax receipts. However again there could be some movement to restrict reliefs, such as:
Further reductions in Business Asset Disposal Relief. The CGT rate for BADR qualifying gains has already increased to 14 per cent, and is due to move to 18 per cent from April 2026. Could this be the last rites for this relief?
Restriction of main residence relief, perhaps where homes are sold for more than somewhere between £500,000 and £1.5 million
Additional tax on high value properties (a “mansion tax”)
Other potential areas for changes
A few other areas where we could see some movement and not all negative:
Changes to the VAT registration threshold although this is unlikely. Changes in headline rates are also unlikely, although we may see some movement around import and export charges given the quantity of changes elsewhere in Europe and the US.
Reforms of Council Tax – maybe revaluing properties for assessment of bands
Stamp Duty Land Tax – full abolition in favour of a new Property Tax has been suggested. This is unlikely to be a quick change but if this is under consideration I would expect a consultation period.
Reduction in annual cash ISA investment limit of £20,000, where it has been for some time.
Reductions in tax incentives for Electric Vehicles as they become more mainstream. The current 100 per cent Capital Allowance for businesses buying new electric cars is due to end in March 2026 and may not be extended this time. Also salary sacrifice arrangements to facilitate EV purchases may be curtailed.
Size limits for tax efficient share options under the Enterprise Management Incentive (EMI) scheme could be reviewed and increased as they have not moved for a decade. This could open up the scheme to larger companies, incentivising succession for business.
Introduction of advanced assurance for R&D Tax Reliefs – this has already been consulted on so I expect to see an implementation plan being announced on Budget Day.
Whatever happens there will be something in the Budget affecting everyone – individuals and businesses alike. We will be watching closely at our live event at Kingsholm and will publish our analysis of the changes on the day.
If you are an existing client and have any questions or concerns regarding your own position in advance of the Budget please reach out to your usual Randall & Payne contact to discuss your situation. If you are not a client and would like a Tax Health Check please contact the Tax team on 01242 776000 or Tax@randall-payne.co.uk.
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