With the Autumn Budget approaching, attention is shifting from headline tax rates to more targeted measures. Our stance is steady and simple: progress the plans you already intended to make, document gifts properly and steer clear of the more alarmist headlines. With suitable preparation and expert advice, individuals can ensure they are well informed and prepared for any changes.
Pensions are firmly in focus – both because of the Treasury cost of relief (in 2022/23, pension tax relief cost £48.7 billion)1 and because of how pensions have historically been used for wealth transfer. We’ve seen heightened client interest in taking tax‑free cash,2 but history suggests major pension changes come with a runway, not an on‑the‑day switch. That was true of the lifetime allowance reforms and is true of the inheritance‑tax treatment of pensions, which starts from April 2027.
From that date onwards, most unused pension funds will be included in the estate for IHT. Transfers between spouses remain exempt. For deaths post‑75, beneficiaries may face both IHT and income tax; HMRC has consulted with the industry on this double taxation issue albeit the 2025 budget may come too soon for this announcement, and we would expect this to be pushed into the 2026 statement.
In practical terms, now is the time to review death‑benefit nominations, check how pensions interact with wider liquidity and consider lifetime withdrawals only where they already serve a clear purpose (for example, meeting a known liability such as a mortgage).
Elsewhere, the cost of pension tax relief remains an obvious lever. Expect discussion around tightening salary‑sacrifice and the structure of relief (for example, a flat‑rate approach). Specifics are uncertain, and we do not expect an immediate clamp‑down on tax‑free cash with historic public statements reaffirming its place in the system. If we do see an adjustment, we would expect some form of window for savers to extract at the current rate rather than an immediate reduction.
IHT’s reach continues to expand via frozen thresholds. Had the nil‑rate band been inflation‑linked since its introduction through to the end of the current freeze in April 2030, it could have reached as much as c. £550,000 rather than £325,000 – a classic case of ‘fiscal drag’.3
Fiscal drag refers to the process where tax bands remain fixed while incomes rise. As wages increase with inflation or growth, it results in more income being taxed at higher rates over time, even though tax rates haven’t changed. This means the government collects more tax, without technically raising rates.
While an outright “gift tax” appears unlikely, tweaks to the seven‑year Potentially Exempt Transfer window (where a gift made is outside of your estate after seven years) to taper relief, or even to lifetime gifting allowances – for example, introducing reporting requirements – are all live discussions and on the table.
The main message here for all private investors is to ensure that gifts are documented clearly. If you are minded to make a gift, the regime is unlikely to be more friendly after the budget, therefore, a level of expedience here may be valuable.
A wholesale overhaul of council tax or a full‑blown mansion tax looks unlikely given the operational complexity of implementing such reforms. More plausible are targeted tweaks – extra bands or surcharges for second homes.
One lever to watch is National Insurance Contributions on rental income: landlords currently pay income tax but not NICs on rents; adding NICs would be a relatively quick way to raise revenue. Landlords should sense‑check cash‑flows in case the post‑tax position tightens.
One of the most significant but less visible changes is the expected continued freeze on income tax bands until at least April 2030. This ’fiscal drag’ is expected to raise around £7 billion per year4 for the Treasury and will affect a growing number of clients as their incomes and assets rise.
While the ISA annual subscription limit remains at £20,000, it has not increased with inflation and is frozen until 2030, reducing its real value over time. The allowance available to cash ISA savers is expected to be reduced considerably to encourage savers to invest for long term growth.
As the Autumn Budget approaches, the message for private clients is clear: focus on preparation, not prediction. While the direction of travel is towards more targeted taxation and tighter allowances, sweeping overnight reforms remain unlikely. The best course is to review your plans, ensure your documentation is in order and take action only where it aligns with your long-term objectives. In a changing landscape, calm and clarity should serve you better than speculation.
[2] Financial Conduct Authority
[3] AJ Bell
[4] BBC News
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