What Tax Changes Can We Expect in Autumn Budget 2025?

Wouldn’t you know it, it’s nearly the end of June. In a few months, we will be greeted with the Autumn Budget 2025. This is why there is renewed focus on how the government can plug the still considerable budget gap without breaking the key promises it made during the election.

This is made more pertinent by the recent HMRC figures that have revealed just how much revenue even small changes to major taxes can generate. For instance, a 1p rise in the basic rate of Income Tax can apparently bring in nearly £7 billion in the initial year, and up to £23 billion by 2028/29.

However, despite this potential, the government may not target Income Tax because it has promised not to raise taxes on working households. Sore targeted taxes on fewer people, such as the Capital Gains Tax, may be in their sights instead.

How Can the Government Collect More Taxes by Targeting Fewer People?

Experts comment that the government is in a tricky balancing act. If economic growth is underwhelming, tough choices will be required, such as cutting spending or increasing taxes. With taxes such as Income Tax, National Insurance, or VAT yielding the highest revenue, officials must decide whether to target major reforms to a small number of taxes or implement smaller changes to many.

If the government is to have a change of heart, National Insurance might be an attractive lever. The former chancellor reduced the basic rate twice at the end of 2023 and early 2024, reducing it from 12% to 8%. Undoing this trend, even to a limited extent, would pay for itself in huge sums. A 1p increase in National Insurance Contributions paid by employees alone would bring in more than £5.3 billion in the first year and more than £16 billion in three years. Combined with a corresponding increase in income tax, it would bring in almost £40 billion overall.

Will Autumn Budget 2025 Change VAT Rates?

Another major fiscal choice is VAT. A simple 1% rise could bring in £27.5 billion. Politically, however, this would be quite unsafe to do. Any change to VAT would be interpreted as a breach of the ruling Labour party's pre-election commitments, potentially harming people's trust.

It is difficult to navigate through this terrain, economic advisers note. Tax reforms would be required if the economic performance weakens, and each choice carries political and economic consequences. In place of sweeping change, a collection of smaller tax adjustments might be considered, but that could incite widespread resentment among the affected groups.

Conclusion

Although the official Autumn Budget date has yet to be announced, policymakers are already engaged in serious discussions.

With the public finances tightened and promised commitments under pressure, expectations are high to see how Chancellor Rachel Reeves balances the fiscal responsibility with political obligation.