Chancellor Rachel Reeves will deliver her 2025 Autumn Budget on the 26th of November, a difficult budget expected to include higher taxes and at a crucial economic time. In her pre-Budget speech in Downing Street (4 November), Reeves said she has “put the country first” and made decisions facing “the world as it is, not the world I want it to be”.
Reeves has the challenging task of restoring confidence in the UK’s economic authority while supporting consumers and businesses. Following a series of costly policy changes, increased borrowing costs and low economic growth, the Chancellor needs to find the funds to cover for winter fuel payments and disability entitlements.
US President Donald Trump’s tariffs and Reeves’ £26 billion hike in payroll tax have also weighed on the economy, and with expectations of inflation to remain elevated and growth subdued, Reeves’ budget is anticipated to combine restraint and careful stimulus to boost productivity and regional growth. Here’s what to expect across key policy sectors.
Tax & Revenue Measures
Fiscal drag
The freeze of income tax thresholds, what is known as “fiscal drag” or “stealth tax” offers additional government revenue. The Resolution Foundation think tank has pointed out that if Reeves extends the freeze on income tax thresholds for two years, she could raise £7.5 billion to balance the books. At the Autumn 2024 Budget, she promised that the government would not extend it beyond April 2028 to help working people.
Inheritance (IHT)
The main thresholds for inheritance have been frozen since 2009 and 2021. There is speculation that Reeves may introduce a “lifetime gifting cap” where any gift above £100,000, offered by an individual while they are alive or after they die, could be taxed. She may also end the PET exemption period where no inheritance tax applies if the donor survives seven years after the gift, by either increasing it to ten years or ending it altogether.
Capital gains tax (CGT)
The “rebasing” rule for inherited assets could be removed which means those who inherit assets could pay CGT on the full gain since the asset’s original purchase, rather than since the date of inheritance.
Those emigrating from the country can currently sell UK assets without paying any CGT, but the Chancellor could make them pay a 20% charge at the point of departure, which would raise £2 billion for the Treasury.
Another proposal is to charge CGT at 18% for basic-rate taxpayers and 24% for higher taxpayers when they sell their main home worth over £1.5m.
Pension tax relied
Currently, when an individual pays into a pension, the government adds tax relief at their highest rate of income tax which is 20% for basic-rate, 40% for higher-rate and 45% for additional-rate taxpayers. There are concerns that it could be changed to a flat rate of 25-30% for everyone which, for those higher or additional-rate taxpayers, would mean a massive drop to a valuable incentive to save for their future.
Non-Dom regime reform
While initially in last year’s budget Reeves announced plans to scrap the non-dom tax status, following pressure from wealthy individuals, especially over new rules taxing worldwide assets of UK residents at 40%, she promised to make tweaks to soften the changes. A Treasury spokesperson has clarified that the government is working with stakeholders to ensure the UK remains competitive and attractive to international investors.
Trade & Tariff impact
Reeves has recognised the disruption to trade that the “rushed and ill-conceived Brexit” has caused and blamed Trump’s tariff war for the hard decisions she will be forced to make. Following her recent visit to the Gulf where she secured more than £6.4bn in two-way trade and investment deals with Saudi Arabia, Reeves argued that expanding trade with the Gulf would help reverse the damage caused by Brexit, austerity and the mini-budget. In her pre-Budget speech, she highlighted how “signing trade deals with the EU, the US and India” will help our businesses export around the world.
Spending & Growth plans
Welfare cuts and reversals
After Labour backlash, the government had to make a U-turn on billions of pounds in benefit cuts to disability earlier this year, but it is still going ahead from April 2026 with cuts for future claimants of the health element of universal credit.
Reeves may also be forced to look at welfare savings along tax increases including scrapping the pensions triple lock, cutting health-related and disability benefits and limiting growth in spending on special educational needs. As she said, she “can’t leave welfare untouched.”
Reeves is also planning to remove tax breaks for the Motability scheme which is designed to help disabled people access cars subsidised by the government.
The “Leeds Reforms” for the financial sector
The government in its attempt to boost economic growth and the financial services sector has created a set of initiatives designed to encourage more financial risk-taking by companies and consumers. From cutting costs relating to senior bankers’ accountability rules to campaigns to encourage stock investing, the government hopes to make the UK the “number one” hub for financial services firms by 2035.
Currency market insight
GBP/USD and GBP/EUR forecasts
The autumn budget is expected to be a major event for the pound, generating uncertainty and creating volatility for both GBP/USD and GBP/EUR. The pound underperformed its major peers following Reeves’ pre-budget speech as investors turned cautious on expectations that the Chancellor will raise taxes in the upcoming budget this month.
Risks to pound stability
Analysts have noted that while the impact of the budget could be negative, if Reeves succeeds in balancing fiscal responsibility with the government’s drive for growth, this could support gilt yields and GBP sentiment.
Recently, rising gilt yields reflected uncertainty about the UK’s fiscal position, which has hurt Sterling. If Reeves shows fiscal discipline by building a larger financial buffer to reinstall investor confidence, then a drop in yields could support the pound.
The budget will be accompanied by the Office for Budget Responsibility’s forecasts, and if they paint a gloomy picture for the economy, then the pound could weaken.
