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The upcoming autumn budget in November 2025 is poised to be one of the most consequential fiscal events in recent memory. As Chancellor Rachel Reeves seeks to navigate a landscape of high national debt and demands for improved public services, the focus is shifting from broad-stroke economics to a detailed overhaul of the UK's tax system.
While headline pledges on income tax, national insurance, and VAT will be honoured, the government is expected to introduce a series of profound changes to taxes on capital, savings, and wealth. The upcoming statement will likely go far beyond the already announced policies on private school fees and 'non-dom' status. It is expected to usher in a new era for Inheritance Tax, Capital Gains Tax, pensions, and ISAs, fundamentally altering the landscape for savers and investors across the country.
For years, Inheritance Tax (IHT) has been viewed as complex and ripe for reform. The current system, with its combination of a nil-rate band, a residence nil-rate band, and various reliefs, is seen by many as inefficient. The Chancellor is expected to announce a significant simplification, with speculation centring on two key areas.
First, there is a strong possibility of major changes to reliefs. Agricultural Property Relief (APR) and Business Property Relief (BPR) are under intense scrutiny. These reliefs allow certain assets, including farmland and shares in unlisted companies, to be passed on free of IHT. While designed to prevent the breakup of family farms and businesses, critics argue they are now primarily used by the very wealthy for tax planning. The budget may see these reliefs capped or restricted, drastically increasing the IHT exposure for larger estates.
Second, and more controversially, is the discussion around pensions. Currently, defined contribution pension pots can be passed on tax-free in most circumstances, sitting outside the estate for IHT purposes. This has made pensions an extremely effective vehicle for intergenerational wealth transfer. A growing number of policy experts have called for this to end, arguing that pensions should be brought within the scope of IHT. While politically challenging, such a move would represent one of the most significant changes to the tax system in a generation.
Capital Gains Tax (CGT) is another area where the Chancellor is expected to act. There is a widespread view in government that the current disparity between tax rates on earned income and tax rates on gains from assets is unfair. Consequently, the headline change is expected to be an alignment of CGT rates with income tax rates. This would see the current 20% rate for higher-rate taxpayers on most assets rise to 40% or 45%, and the 28% rate on residential property also increase significantly.
Alongside a rate rise, the annual exempt amount, the tax-free allowance for capital gains which currently stands at £3,000, may be further reduced or abolished entirely. This would bring thousands more people into the CGT net for even modest gains. These changes would make selling assets such as second homes, investment properties, and share portfolios a much more costly affair, encouraging investors to think more carefully about the timing of disposals.
While the state pension will be protected by the 'triple lock', private pension saving is likely to be a target for revenue raising. The government is expected to review the generous tax relief offered on pension contributions, particularly for higher earners.
Currently, individuals receive tax relief at their marginal rate of income tax, meaning a higher-rate taxpayer can receive 40% relief on their contributions. A long-mooted reform is to introduce a single, flat rate of relief for all savers, potentially set at around 25% or 30%. This would represent a tax cut for basic-rate taxpayers but a significant tax increase for higher and additional-rate taxpayers, reducing the incentive for them to contribute large sums to their pensions. Another possibility is a reduction in the annual allowance, the amount you can save in a pension each year while still receiving tax relief, from its current level of £60,000.
The Individual Savings Account (ISA) system has grown into a confusing landscape of different products, including the Cash ISA, Stocks and Shares ISA, Lifetime ISA, and Innovative Finance ISA. The Chancellor is expected to announce a major simplification of the ISA wrapper, potentially merging the cash and stocks and shares variants into a single product.
More significantly, there is speculation about the introduction of a lifetime cap on the total amount that can be held in an ISA. While the current annual subscription limit is £20,000, some very large ISA pots, worth millions of pounds, have been accumulated over the years, allowing for substantial tax-free gains. A lifetime cap of perhaps £250,000 or £500,000 could be introduced to limit the amount of wealth that can be shielded from tax, a move that would align with the government's broader goal of reducing tax advantages for the wealthiest savers.
As the tax burden on mainstream investments and estates is set to rise, government-backed venture capital schemes are expected to become an even more crucial part of financial planning. The Enterprise Investment Scheme (EIS) and the Seed Enterprise Investment Scheme (SEIS) were designed to encourage investment in early-stage, innovative British companies by offering significant tax reliefs.
In a climate where CGT and IHT are rising, the benefits of these schemes become far more pronounced:
Income Tax Relief: EIS offers 30% income tax relief on investments up to £1 million per year, while SEIS offers an even more generous 50% relief on investments up to £200,000.
Capital Gains Tax Exemption: Any gain made on the sale of EIS or SEIS shares is completely exempt from CGT, provided the shares are held for at least three years. This is a powerful benefit when CGT rates on other assets could be doubling.
Inheritance Tax Exemption: Shares in EIS-qualifying companies are generally exempt from IHT after being held for just two years, as they qualify for Business Property Relief. This offers a much faster route to IHT exemption than many traditional estate planning methods.
Loss Relief: If the shares are sold at a loss, the investor can offset that loss against their income tax bill, providing a valuable cushion against risk.
Tax treatments depend on individual circumstances and may be subject to change. As the government tightens the tax rules for conventional assets, the generous and legislated reliefs offered by EIS and SEIS will make them an increasingly vital tool for experienced investors looking to mitigate higher tax bills while supporting the next generation of UK business growth.
