Navigating the Autumn Budget: Answering the top questions from our pre-Budget webinar

Chancellor Rachel Reeves added to speculation around the Autumn Budget on 4 November with an unexpected speech from Number 9 Downing Street.  

What was interesting was not what Reeves did say, but what she did not. Questioned by journalists, she declined to rule out rises in the three biggest taxes – income tax, national insurance, and value-added tax – despite manifesto promises. This reflects the hard choices she faces. The general consensus after the speech was that the country should be braced for tax hikes on 26 November, with income tax rises the most likely to happen of the three. However, on 14 November the Financial Times reported that Reeves had abandoned this plan, leaving the Treasury scrambling to raise money through other means.

During this period of speculation, Rathbones held a webinar on 4 November – part of our Investment Insights series. We invited questions, with many wanting to know more about financial planning and the broader economy.  

Our research shows that the top three topics most in the minds of our clients ahead of Budget day are pensions, income tax and inheritance tax (IHT) – and these questions loomed large in the webinar.  

Our panel didn't get time to answer all of the questions we had on the day, so we asked them for their thoughts after the event on some of the questions that were left:  

What’s the latest on changes to pension tax-free cash?  

Ahead of the Budget, reports were rife of a reduction in the tax-free lump sum allowance. This tax-free cash is ordinarily 25% of your pension pot, up to a cap of £268,275. You can take this from age 55 (age 57 from April 2028).  

Speculation about changes to tax-free cash led many people to withdraw money from their pensions before last year’s Budget. You can’t put this money back if the rules don’t change, so we recommended against knee-jerk reactions to these types of headlines – much as we understand how tempting these can be.  

And then, on 11 November, the Treasury announced there would be no changes to the pension tax-free lump sum allowance.

It’s always important to think about your personal financial situation and to do what’s right for you in the long term, rather than react hurriedly to media reports. Moreover, previously, when changes are announced there’s been a grace period before they take effect and protection for existing arrangements.  This will give you time to plan for the best possible outcome for you.  

Will there be an increase in capital gains tax?

Capital gains tax (CGT) is a levy on the profit you make when selling an asset that has increased in value. That includes investments and second homes. Everyone gets an annual £3,000 CGT allowance, so if the total of all gains and losses in the tax year falls within your allowance no tax is payable. Gains in excess of the allowance are taxable.  

CGT rates increased at the last Budget to 18% and 24% but remain well below income tax rates so there’s potential the Chancellor will raise rates further.    

It's well-known that you don’t pay CGT when your sell your main home. There’s speculation that this could be removed on more valuable properties. This is problematic from an administrative point of view and would be distorted by the higher average value of properties in London and the South. Although most people even in these regions who have expensive property are high-income, a substantial minority are not – they’ve simply benefited from the rise in property values over many years. For these reasons, we think it’s unlikely this will be part of the Chancellor’s plan. Reforming property taxes, like Council Tax, which uses property valuations from 1991, would look to be a more sensible option.  

Could we see changes to other property taxes in the Autumn Budget?

There’s been talk about other possible reforms to property tax in the Autumn Budget. One idea discussed is the introduction of a mansion tax – an annual levy that that could target properties valued at £2mn and higher.  

Another option for the Chancellor is reforms to council tax. Current council tax bands are based on property valuations from 1991. Council Tax is regressive, which means that people in expensive homes pay less as a share of their property’s value than those in cheaper homes. An update to property values or adjustments to the amount paid by owners of properties in the higher bands could be on the table in a few weeks.  

What are some tips for gifting and protecting your financial security?  

With unused pension funds and death benefits coming into scope for IHT from April 2027, many people are turning to gifting to pass on as much of their wealth as they can.  

Timing can be a factor with gifting. Currently, if the person gifting survives seven years after making that gift, there is no IHT to pay because that gift is not considered as part of your estate. If you had already been planning to gift money imminently, it could be worth doing this before the Budget.  

However, it’s important to get the balance right between helping the people and causes you care about and making sure you can protect your financial security for the future.  

This is a perfect opportunity to speak with your financial planner. They can help you forecast your future financial position and design a robust financial plan that works for you, balancing your income needs and long-term goals.  

Will income tax go up?

Since the Chancellor’s unexpected speech on 4 November, talk of an income tax rise had gone from speculation to certainty in the eyes of many commentators. As always, we were extremely wary of assuming any changes before they’ve been announced. Reeves refused to rule out an income tax rise on the day. However, the Financial Times has since reported that there will be no increase in income tax.  

Former Chancellor Rishi Sunak froze income tax thresholds in 2021. This freeze was extended by Rachel Reeves until 2028. Over time, this pulls an increasing number of people into higher rate tax bands, meaning more people pay 40% and 45% tax rates as earnings creep up. We might see these frozen for longer, which could raise significant sums. There is even media speculation that the thresholds could be lowered, to compensate for the fact that a rise in the rates now looks unlikely. If the thresholds are lowered, even more people could be pulled into the higher tax bands and thus pay income tax at higher rates.  

What changes to ISAs are expected in the Budget?

There have been quite a few column inches dedicated to potential reforms to cash ISAs. The total allowance across all ISA accounts is currently £20,000 this tax year. Media reports suggest that Reeves is considering placing a cap on the amount of money that can be saved into a cash ISA. Up until now, you can put the full £20,000 into a cash ISA. This could be reduced to encourage people to use the money to invest in a stocks and shares ISA. This would chime with the Chancellor’s goal of boosting economic growth by getting more investment into UK companies.  

What should you do?

While it’s wise to stay informed about potential changes, we recommend pausing before making any hasty decisions until any details are confirmed. A financial planner can help you work out what different scenarios could look like for your financial situation.  

If you have any questions or concerns about how potential changes in the upcoming Budget could affect you, please get in touch with your Rathbones contact or fill out our contact form below. We’re always here to help.  

If you missed our Investment Insights webinar on the day, you can watch it here.  

Register for our next webinar on 27 November to stay up to date on all of the developments from the Autumn Budget.  

This information is based on our current understanding of HMRC tax regulations in the UK. Tax treatment depends on your individual circumstances and may be subject to change in future.