Rachel Reeves 8 potential Autumn budget tax hikes - from inheritance to pensions

Chancellor Rachel Reeves had already hit the nation with billions of pounds in taxes but the bills are likely to keep on coming. As she prepares for the Autumn Budget experts are already predicting UK citizens will be facing billions of new costs.

In 2024 there were a string of changes which added to the tax burdon of millions of people including applying inheritance tax to unspent pensions. But most experts believe this was only the start with more tax hikes coming with the 2025 budget which takes place on November 26.

Marianna Hunt, a finance expert from financial firm Fidelity International, has drawn up eight areas which could be targeted. But warning people not to make snap decisions on financial plans on the back of speculation as it could be very costly, she examined what any changes could mean.

Inheritance tax

While speculation on IHT changes has so far focused on gifting allowances it has now been flagged that the government is considering implementing a lifetime cap on the amount you can pass on inheritance tax free. At present you can pass on an effectively unlimited amount without paying the tax through gift provided the person lives seven years after receiving the gift.

This could now change with a lifetime cap on the value of gifts. Marianna says: "If the government imposed a £100,000 lifetime cap on the value of gifts that someone can pass on before they die, assuming you hit the £100,000 limit by using up gifting allowances and then gifted another £200,000, then your heirs would pay 40% IHT on the £200,000, so £80,000.

"If the cap was £200,000 and you gifted £300,000 in total (using up the full allowance), then your heirs would pay 40% IHT on £100,000, so £40,000. If a punitive cap of just £50,000 was introduced then, in this situation, the heirs would pay IHT of £100,000 on gifts totalling £300,000."

ISAs

Currently you can save up to £20,000 per year in either a cash ISA or stocks and shares ISA or split between the two. However earlier this year policymakers were planning to limit the cash element of that to encourage more of us to invest.

While that has been put on hold it is thought to be just a temporary measure. Rachel Reeves may use the Autumn Budget as an opportunity to revive them.

Property taxes

Speculation is also rife that the chancellor could use the Autumn budget to overhaul property taxes. This could even see stamp duty and council tax replaced with a new annual tax on homes worth more than a certain amount, says Marianna.

She warned: "Such changes would disproportionately hit those in places such as London and the South East, where property values are particularly high." Alternatively another way to raise additonal money from property taxes would be to introduce new, higher council tax bands.

"It has been suggested that capital gains tax (CGT) could be introduced on people's main homes if they sell for more than a set amount. Currently, CGT is only applied when you sell an additional property, not your main home. Again, for the moment, this is pure speculation," said the expert.

Income tax

During its election campaign, Labour pledged not to raise the three key taxes - income tax, employees' National Insurance contributions, and VAT. But it could go ahead with a "stealth increase" by extending the freeze on income tax thresholds which pushes more people into paying tax at either the lower or higher rate.

The government is due to end the freeze on income tax and National Insurance thresholds in 2028 - but this decision could be reversed to plug the hole in state finances. Marianna explained: "According to The National Institute of Economic and Social Research (NIESR), extending the freeze beyond 2028 could raise an additional £8.2 billion in tax revenue."

Capital gains tax

Capital gains tax (CGT) is the tax you pay when selling an asset at a profit. Currently selling your main home or investments within an ISA does not mean a CGT bill.

However it is thought the government is likely to seek ways to increase revenues from CGT possibly by reducing the current tax-free allowances or increasing rates. Basic rate taxpayers currently pay CGT of 18% while higher rate taxpayers pay 24%.

Dividend tax

Marianne said: "The amount you can receive tax-free in dividend payments has been gradually reducing for several years. The tax-free dividend allowance has been cut back from £2,000 back in April 2023 to just £500 today. But that's not to say the government couldn't reduce this further. Dividends received within an ISA should remain tax free."

A wealth tax

Some from within the Labour party have been calling for a new tax on Britain's wealthiest citizens, said the expert. She said: "This could, for example, take the form of an annual levy on individuals with assets above a set threshold, say £5 or £10 million.

"However, there is not consensus among the party on whether this is a good idea and critics have suggested it could encourage wealthy people to leave the UK entirely."

Pensions

A wide area of potential pension targets have been the subject of speculation. These include limiting salary sacrifice schemes and changes to pensions tax relief.