In its manifesto, the government confirmed that it would not raise taxes for ‘working people’, in particular the headline rates for Income Tax, National Insurance and VAT. However, this still leaves considerable scope for wider targeted tax increases to raise much needed revenue. Here are some key areas to keep in view:
Pensions
There is strong speculation around changes to pension tax treatment. This might include:
- Reducing or limiting the amount of tax-free cash you can withdraw from your pension pot, which currently stands at 25%.
- Reducing the Annual Allowance, the maximum annual amount that can be saved into pensions and receive tax relief (currently £60,000 per year). There is also the tapered annual allowance for high earners, which reduces the annual allowance for those with income exceeding £260,000 – we could see this threshold reduced.
- There could also be a change to the way Income Tax relief is granted, by moving to a flat rate of Income Tax relief, rather than the current system of relief at the individual’s marginal rate of Income Tax. Whilst this would be good news for basic rate tax payers, it would be bad news for higher and additional rate tax payers, to whom the vast majority of Income Tax relief is granted.
Capital Gains Tax
Labour may consider aligning Capital Gains Tax rates more closely with Income Tax rates. Currently, capital gains are taxed at lower rates than income, at 18% for gains falling in the basic rate tax band and 24% on gains above that.
The Capital Gains Tax allowance has already been reduced significantly in recent years and savers are effectively paying tax on inflationary growth already. This would particularly impact higher-income individuals who receive significant income from investments, rather than earnings or pension income.
Wealth Tax
A wealth tax is something that has been mooted for many years. This tax would target high-net-worth individuals, potentially those with assets exceeding a certain threshold, such as £10 million. This might be a one-off charge or alternatively an annual levy on the value of assets, including property, investments, and savings. The policy aim would be to ensure that the wealthiest individuals, who have benefited significantly from economic growth, contribute more to the nation’s finances.
Inheritance Tax
Inheritance Tax reform is another area where Labour may seek to raise tax revenues. Current thresholds and rates might be adjusted, potentially lowering the current £325,000 nil rate band above which Inheritance Tax is paid, or increasing the current 40% tax rate itself.
The government could also introduce new measures to restrict Inheritance Tax mitigation through the use of trusts and other mechanisms. These changes would aim to ensure that large inheritances are taxed in a way that contributes more to the public purse.
VAT
Whilst the government confirmed that it will not raise the 20% VAT rate, it could potentially look at reducing VAT exemptions or zero rates on certain goods and services. For example, Labour introduced VAT on private school fees from 1 January 2025.
Any changes to VAT would need to be balanced with the potential impact on lower income households, who spend a larger proportion of their income on VATable goods.
Property Taxes
Labour could overhaul the current Council Tax system. The current ‘bands’ on which Council Tax is calculated have not been updated since the tax was introduced over 30 years ago.
Alternatively, they could propose a more progressive property tax system, for example a levy based approach calculated on the current market value of properties rather than fixed bands. The problem with this would be different tax takes for different councils due to regional variations in property prices.
Additionally, the government might introduce further taxes on second homes and empty properties.
Staying calm and prepared
Whilst some comments in the press about the forthcoming Budget may feel a little unsettling, it is important not to make any decisions based on pure speculation. Many of these potential changes are just that – potential, not guaranteed.
With the 2025 Budget just around the corner, it’s a good time to ensure your financial plan is in a strong position no matter what the Chancellor decides. Please speak to your Origen financial adviser if you have any concerns.
We will also shortly send an exclusive invite to Origen’s post-Budget webinar, being held on 2 December 2025, which covers the impact of the Budget announcements on financial plans.
CA13167 Exp:10/2026
