What We Know About Rachel Reeves’ Budget So Far
With the Autumn Budget fast approaching, Chancellor Rachel Reeves faces increasing pressure to balance the government’s books while keeping Labour’s election promises intact. Economists estimate that she must find between £20 billion and £50 billion to meet her fiscal target of matching day-to-day spending with tax receipts by 2029–30, all while maintaining a £10 billion buffer. This financial challenge leaves little flexibility as she works within her self-imposed limits on borrowing and public spending.
Reports suggest that Treasury officials are in active discussions about possible tax changes to address a potential £30 billion shortfall. While Labour previously pledged not to increase the main taxes on working people, Reeves is said to be considering options that would focus on higher earners. Her stated aim has been to ensure that those with the “broadest shoulders” contribute the most towards stabilising the economy.
Although Reeves has not confirmed any specific tax increases, she has refused to rule them out. She emphasised that the cost of living remains the top concern for households and that her priority is to support working people while keeping their taxes “as low as possible.” However, she added that the full details of her fiscal plan are still being finalised ahead of the official announcement.
Income Tax
Labour’s election manifesto included a promise not to raise VAT, income tax, or national insurance. However, Reeves has avoided repeating that commitment word-for-word in recent interviews, prompting speculation that adjustments may still be on the table. A potential 1p rise in the basic rate of income tax has reportedly been discussed, though other options could focus on wealthier individuals instead.
The basic rate of income tax currently stands at 20% on earnings between £12,571 and £50,270, while higher-rate taxpayers pay 40% on income up to £125,140. Anything above that level is subject to a 45% additional rate. These thresholds, which apply across most of the UK, have not been raised for several years, and the basic rate itself has remained unchanged since the 1970s.
Instead of changing tax rates outright, Reeves may choose a more indirect approach by extending the existing freeze on income tax thresholds beyond 2028–29. This “fiscal drag” means more people gradually move into higher tax brackets as wages rise, effectively increasing the government’s tax take without altering rates. Critics have labelled it a stealth tax, but both Reeves and Prime Minister Keir Starmer have so far declined to rule it out.
Property and Wealth
When it comes to property and wealth taxes, the Chancellor has ruled out introducing a broad-based wealth tax. However, her comments earlier this year about “accumulated assets” rather than income being a fairer measure of wealth have sparked speculation about more targeted levies. One proposal reportedly under review is a so-called “mansion tax,” which would impose an annual 1% charge on the value of a property above £2 million.
According to property website Zoopla, around 160,000 homes in the UK are worth £2 million or more — roughly 0.6% of the housing market. A homeowner with a £3 million property could face an additional annual bill of £10,000, while someone with a £5 million home might see their costs rise by £30,000 a year. Another potential reform under discussion is a national property tax that would replace stamp duty for owner-occupiers of homes worth more than £500,000.
This new levy would be applied upon sale and linked to the property’s market value, though it would not replace stamp duty on second homes or investment properties. These measures, if implemented, would mark a significant shift in how property wealth is taxed and could reshape incentives for homeowners in high-value areas.
Capital Gains Tax
The Treasury is also reported to be reviewing possible changes to capital gains tax (CGT) as part of its search for new sources of revenue. CGT currently raises around £13.3 billion each year and is applied to profits from the sale of assets such as second homes, shares, or valuable collectibles. The sale of a primary residence is usually exempt under principal private residence relief.
Officials are said to be examining whether to narrow this exemption, potentially applying CGT to certain higher-value homes for the first time. Such a move would be one of the most politically sensitive tax changes in recent decades, particularly given the potential impact on long-standing homeowners.
At present, higher-rate taxpayers pay 24% CGT on residential property gains, while basic-rate taxpayers pay 18%. Even a small adjustment to how “high-value” homes are defined could generate billions in revenue. However, analysts warn that any gains could be offset if the measure discourages property sales, reducing overall transaction volumes.
Cash ISAs
Another key reform under consideration involves the popular tax-free savings vehicle, the Individual Savings Account (ISA). At present, savers can invest up to £20,000 each year across various ISA products, including cash ISAs, stocks and shares ISAs, and lifetime ISAs.
The Chancellor is reportedly preparing to cut the limit for cash ISAs while maintaining the overall £20,000 cap for equity-based products. The intention is to encourage savers to channel more of their funds into UK companies, providing an additional source of investment capital for domestic businesses.
Supporters of the policy argue that this will help strengthen the economy and deliver higher long-term returns for savers. However, critics, including financial advisers and consumer groups, warn that reducing the cash ISA allowance could undermine confidence among more cautious savers, especially during a period of high living costs and elevated interest rates.
Inheritance Tax and Pensions
Inheritance tax reform is also being discussed within the Treasury. From 2027, unused pension funds will already count towards taxable estates, but further restrictions may be introduced. These could include limits on lifetime gifts or caps on the value that can be transferred to relatives tax-free.
In parallel, debate continues over the threshold at which inheritance tax becomes payable. Some reports suggest it could rise to £5 million in response to lobbying from farming and rural communities, who argue that current rules unfairly penalise family-owned land and small businesses.
Pension reform is another area of focus. Currently, individuals aged 55 or over can withdraw up to 25% of their pension pot — to a maximum of £268,275 — tax-free. There is speculation that Reeves may reduce this allowance, prompting some savers to consider early withdrawals before the budget is announced on 26 November.
Fuel Duty, Retail and Gambling Taxes
Motorists could face higher costs as the government reconsiders the temporary 5p per litre cut in fuel duty introduced in 2022. Reversing that reduction and reintroducing inflation-linked increases could raise around £2.7 billion annually. The standard rate of 52.95 pence per litre has been frozen for more than a decade, so any change would be significant for households and businesses alike.
In the retail sector, major supermarkets have voiced opposition to reports of a potential business rates surtax on large commercial properties. Industry leaders argue that any additional financial burden would ultimately be passed on to consumers, pushing up prices at a time when inflation remains high.
Pressure is also growing within Labour ranks to increase duties on online gambling. Former Prime Minister Gordon Brown has advocated for higher taxes on gambling profits, potentially raising the rate from 21% to as much as 50%. At the same time, banks and financial institutions are warning against new sector-specific levies, fearing they could damage competitiveness in the City of London.
The Balancing Act
As the 26 November Budget approaches, Reeves faces the daunting task of restoring stability to the public finances without breaking Labour’s key promises. With borrowing costs still high and demands on public services growing, her choices are limited and politically sensitive.
The Chancellor has promised to deliver a responsible, fair, and credible plan for growth — but with such a large fiscal gap to close, every measure will come under intense scrutiny. The upcoming Budget is likely to set the tone for the government’s economic direction in the years ahead, balancing fiscal discipline with the need to protect working households.
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