“Difficult” Autumn Budget 2025: Rachel Reeves Hints at Possible Tax Rises

As anticipation builds for the Autumn Budget 2025 scheduled to be presented on 26 November, Chancellor Rachel Reeves has begun preparing the public for the possibility of tax rises. Speaking in Liverpool, Reeves carefully framed what sounded like a pre-emptive justification for “difficult fiscal decisions” that may be announced in a few weeks’ time.

In her speech, she linked the need for “tough decisions in the coming months” to two key factors – harsh global headwinds and long-term economic damage revealed by the Office for Budget Responsibility (OBR).

For many observers, this was the clearest signal yet that tax increases may be on the horizon. So, what exactly is going on and why is Reeves making these arguments now?

How Can Global Factors Affect UK’s Autumn Budget 2025?

Reeves’ statement, “the world has changed,” captures the central theme of her message. Around the world, economies are grappling with rising government borrowing costs, ongoing conflicts and sluggish trade growth. These global pressures, she suggested, have created a tougher fiscal environment for the UK.

The Chancellor also pointed to what she called “long-term damage to the economy.” This is a phrase that implicitly refers to weak productivity, stagnant growth and the legacy of past governments. According to the OBR’s upcoming assessment, the UK’s long-term growth potential may be lower than previously thought, which means the Treasury is likely to face a significant shortfall in projected revenues.

This combination of global challenges and domestic economic weakness provides the government with a rationale: if taxes do rise, it will be because circumstances have left them with little choice.

What Will the OBR’s Forecast Contain?

The OBR, an independent body that scrutinises government spending and forecasts, is central to what happens next. The Chancellor will receive the OBR’s draft forecast this week and its contents could determine the size of the gap in the public finances she needs to bridge.

If the OBR downgrades its growth outlook, it could expose a substantial fiscal deficit, forcing the Treasury to either cut spending, raise taxes or borrow more. None of these are politically easy options, but Reeves’ remarks suggest she is leaning towards the first two.

She has also expressed agreement with the International Monetary Fund (IMF) on reforming the way fiscal forecasts are handled. Currently, the OBR produces two major forecasts each year — one alongside the Autumn Budget and another in the spring. Reeves hinted at changing this system so that a full forecast is produced only once a year, which would reduce constant speculation about tax changes and potentially create greater stability for businesses and markets.

‘Responsible Management of Public Finances’

Throughout her speech, Reeves repeatedly returned to the phrase “responsible management of public finances.” This is a deliberate move to reinforce her image as a careful and credible steward of the economy, someone willing to make difficult choices in the national interest.

In practice, this message prepares the political ground for unpopular but necessary tax measures. It also signals to financial markets that the government remains committed to fiscal discipline, something that has become increasingly important since last year’s volatility in government bond markets.

Will Income Tax Rise?

When asked directly whether VAT or Income Tax could rise, Reeves insisted that “the manifesto commitments stand.” However, both she and Chief Secretary to the Treasury Darren Jones phrased these commitments carefully, saying that they “stand today.”

This wording is telling. It suggests that, while the government intends to honour its promises for now, changing economic realities could force it to reconsider. In other words, if the fiscal hole revealed by the OBR proves too large, Reeves may have to look for alternative ways to raise revenue without formally breaking the manifesto pledge.

Can the Government Raise Revenue Without Raising Taxes?

If headline tax rates are off-limits, the Chancellor will need to be creative to raise money. And there are several ways she could display this creativity. Some of them are:

• Extending the Freeze on Tax Thresholds – This “stealth tax” increases the effective tax burden as wages rise with inflation, pulling more people into higher tax brackets.
• Scrapping or Reducing Tax Reliefs – The government could target specific incentives, such as those related to property investment, pensions or Inheritance Tax.
• Tightening Rules on Capital Gains or Dividend Income – These changes would primarily affect wealthier taxpayers but could raise billions over time.

Each of these measures would allow the Treasury to raise funds without increasing the basic or higher rates of the main taxes.

For landlords and property investors, this could mean a review of existing housing-related tax reliefs, such as capital gains exemptions. These areas have long been under scrutiny and could become targets in a revenue-focused Budget.

But again, it all hinges on the OBR’s forecast report. If it suggests that growth will remain subdued, the Treasury’s fiscal gap could widen significantly, perhaps by tens of billions of pounds. This would put further pressure on Reeves to identify credible sources of revenue or cut back on spending plans.

Following that, the “real work” of building the Budget will begin – balancing political commitments with economic necessity and turning a list of potential measures into a cohesive fiscal package.

Rebuilding Credibility & Stability

Another key message in Reeves’ speech was the need for stability. After years of political and economic turbulence (like the mini-budget crisis, high inflation and fluctuating interest rates), the Chancellor is eager to project calm and continuity.

By aligning herself with the IMF and signalling reforms to the fiscal forecasting process, Reeves aims to reduce the uncertainty that has plagued British economic policy in recent years. Investors, businesses and households alike have been calling for predictable policymaking and she appears determined to deliver it.

What All This Means for You

For ordinary taxpayers, the message is mixed. On one hand, Reeves has promised to protect take-home pay and avoid raising Value Added Tax (VAT), which would “put up the prices in shops.” On the other, tax thresholds, allowances and reliefs may quietly be eroded, leaving many people paying more tax in real terms.

For property investors, this could translate into reduced tax advantages, particularly in areas like capital gains and pension-linked property investments. If you rely on specific allowances or reliefs, it would be wise to start reviewing their potential exposure now and seek advice on tax-efficient structuring before the Budget is announced.

Conclusion

Rachel Reeves’ Liverpool speech marks the start of a carefully choreographed lead-up to the November Budget. By framing potential tax rises as both unavoidable and responsible, she is preparing the political and public narrative for difficult choices ahead.

The Chancellor is betting that by the time the OBR’s final forecast lands, the public will understand — and perhaps accept — that some level of tax increase is inevitable.