With Budget 2025 fast approaching, media speculation is running hot. Much like the charge to the first fence at Aintree’s Grand National, it’s fast, congested, and full of potential pitfalls. So, here’s Jonathan’s take on the key personal finance themes, with our rating of how likely each is to appear in the Chancellor’s red box, plus some practical points to consider before Budget Day.
TAX HEADLINES TO WATCH
Income Tax, NIC & VAT Pledge – 1/5
Labour’s manifesto promise not to raise these taxes for working people is likely to hold. But expect some tweaks around the edges:
- Personal allowance & tax bands extended freeze to 2030 – 5/5
- NI on rental income – 4/5
- VAT threshold changes, broadening the VAT base and removal of some exemptions – 4/5
💡 Review your use of allowances and tax bands, considering income equalisation between spouses, whilst landlords should also start preparing for Making Tax Digital from April 2026.
WEALTH & CAPITAL TAXES
A new Wealth Tax – 1/5
Rachel Reeves has pretty much ruled this out. In any case, implementation would be slow, and international evidence suggests it’s an ineffective revenue raiser.
Capital Gains Tax – 4/5
A rise to 28% seems likely. But taxing gains at income tax rates seems a step too far. A higher capital gains tax rate on second properties could also be a possibility along with a possible end to the exemption from capital gains tax at death.
💡Consider realising capital gains ahead of the Budget, especially if you plan to draw on those funds in the next 12–24 months. Take competent advice before you do so to ensure it’s a suitable course of action for your individual circumstances.
A new Mansion Tax – 1/5
Unlikely as the housing market needs stimulation, but reforming council tax for high-value homes (3/5) could be on the cards.
INHERITANCE TAX (IHT)
IHT Changes – 3/5
Following last year’s overhaul of business and agricultural reliefs, further reforms may include:
- Lifetime gifting rules could be changed
- Adjustments to exemptions
- An IHT rate change for larger estates
💡 Spending and gifting remain the most powerful IHT planning tools. Remember: every £1 spent or gifted could save 40p in IHT. Take competent advice before you do so to ensure it’s a suitable course of action for your individual circumstances.
PENSIONS & SAVINGS
Pension Tax-Free Cash – 3/5
Whilst a reduction from the current maximum of £268,275 to a new lower maximum is possible, it’s our view that HMRC would grant transitional protection to those with higher entitlements; HMRC has done so ever since 2006 on reductions to the tax free maximum.
Pension Income Tax Relief – 1/5
Too complex and politically sensitive to change quickly; after all, some of the biggest beneficiaries of the income tax relief are public sector employees.
Employer NI on Pension Contributions – 4/5
A likely revenue-raiser after last year’s business-focused Budget.
💡 If you’re considering taking your tax-free cash, seek advice before doing so. And if you are planning to make pension contributions, doing so pre-Budget also makes sense.
ISAs
ISA Changes – 1/5
Despite speculation, a lifetime ISA cap seems unlikely. And the £20k annual allowance remains frozen until 2030—a real-terms cut of nearly 50%.
💡 If you’re planning to use your ISA allowance, consider doing so early in the tax year and before the Budget, just in case. Take competent advice before you do so to ensure it’s a suitable course of action for your individual circumstances.
OTHER INDIRECT TAXES
SDLT, Motoring taxation, ‘sin’ taxes – 4/5
SDLT looks ripe for reform as part of a drive to stimulate the property market but won’t be a quick fix. A reinstatement of the temporary 5p litre cut to fuel duty is a possibility and sin taxes on alcohol, tobacco, gambling etc are easy targets too.
💡 Fill up the car pre-Budget and stock up early for Christmas!
FINAL THOUGHT
Budget 2025 may or may not bring seismic shifts; no one knows for sure but acting on media headlines is unlikely to bring the best results. We’re here to help and talk through with you. If there’s anything you would like to discuss, please reach out to your Relationship Manager or contact us HERE.
This article is for general information purposes only and does not constitute financial, investment, tax, or legal advice.
The views expressed are speculative and based on current media commentary. They do not reflect confirmed government policy or budget outcomes.
Tax and estate planning advice are not regulated by the FCA.
Spending and gifting as a means of reducing inheritance tax should only be done where affordable.
Any actions taken should be based on individual circumstances and only after seeking regulated financial advice.
This communication is not intended to promote any specific investment, product, or strategy and should not be interpreted as an inducement to engage in investment activity.
