Rachel Reeves’ Budget: Will Your Taxes Go Up? An Expert UK Tax Breakdown

The UK’s budget announcement on November 26th, 2025, is a big one, with Rachel Reeves facing the challenge of filling a significant deficit. All eyes are on her to see how she plans to tackle this, and what it could mean for taxpayers across the country.

Key Takeaways

• A projected deficit of £75-£85 billion needs to be addressed.
• UK GDP is currently showing signs of decline, not growth.
• An additional £20 billion in taxes may need to be raised.
• Potential tax changes could affect income tax, National Insurance, VAT, corporation tax, and inheritance tax.
• Be wary of speculative predictions and clickbait surrounding potential tax changes.

The Budget Deficit: A Huge Hole to Fill

Right now, the UK’s financial picture looks a bit grim. Experts are predicting a deficit somewhere in the region of £75 to £85 billion. And unfortunately, it’s not looking like it’s getting smaller; in fact, it seems to be growing. Rachel Reeves has talked about filling this gap through economic growth, but the current signs suggest the UK’s GDP might be heading downwards, not upwards. This means there’s a real possibility that taxes will need to increase to cover the shortfall.

Where Will the Money Come From?

Analysts are suggesting that around £20 billion needs to be raised through new taxes. So, the big question is, where will this money come from? Let’s look at the main sources of tax revenue:

• Income Tax: This is the biggest earner, making up about 33-35% of all taxes collected.
• National Insurance: Comes in next, around 20%.
• VAT: Also around 20%.
• Corporation Tax: Accounts for about 10%.

These are the major players. The real question is whether Rachel Reeves will stick with the current system or make changes to one or all of these.

Why This Matters to Your Bank Account

When government borrowing increases by £31 billion in a single year, someone has to pay for it. That someone is you. Rachel Reeves made the calculation: instead of cutting spending (politically impossible) or relying on economic growth (which isn’t materialising), she chose to raise £25 billion per year through tax increases.

The Institute for Fiscal Studies warned this would happen. They projected that extending the income tax threshold freeze by two years alone could raise £8.3 billion a year. They were right, but the Budget went much further than that.

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What Changed Previously: The 5 Tax Rises Hitting Your Finances

Let’s cut through the political rhetoric and look at the actual changes that will cost you money. These aren’t predictions they’re law, and they’re coming for your wallet starting April 2025.

1. Employers’ National Insurance: Your Salary and Job at Risk

The single biggest revenue raiser is the increase in Employers’ National Insurance. From April 2025, the rate jumps from 13.8% to 15%, and the threshold where employers start paying drops from £9,100 to £5,000 per year.

What this means for you: If you’re an employee, your employer now pays an extra 1.2% on your salary plus NI on £4,100 more of your earnings. According to the IFS analysis, this change weighs “much more heavily on employers of the low paid.” That means reduced pay rises, hiring freezes, or in worst cases, redundancies.

If you’re a business owner, you’re looking at significantly higher employment costs. A company with 10 employees earning £30,000 each will pay approximately £18,000 more per year in National Insurance. Without planning, this could destroy your profit margins.

Your protection strategy: The Employment Allowance increased from £5,000 to £10,500, which helps smaller businesses. If you employ just a few people, you might be protected. But larger employers need to restructure now—potentially moving to contractor relationships, increasing automation, or optimising wage structures before April.

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2. Capital Gains Tax: Your Investment Profits Just Got Costlier

Effective immediately from October 30th, 2024, Capital Gains Tax rates increased sharply:

• Basic rate taxpayers: Now pay 18% (up from 10%)
• Higher and additional rate taxpayers: Now pay 24% (up from 20%)

Real-world impact: If you’re a higher-rate taxpayer selling investments with £50,000 in gains, you now owe £12,000 instead of £10,000. That’s £2,000 more. Across your lifetime of investing, this could cost you tens of thousands.

The residential property rates stayed at 18% and 24%, but Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) is being phased up to 14% from April 2025 and 18% from April 2026. If you’re planning to sell your business, every month you delay costs you more.

Carried interest (relevant for fund managers and private equity professionals) increases to 32% from April 2025, then moves to income tax treatment from 2026 with a 72.5% multiplier.

3. Stamp Duty: Property Investors Face 67% Higher Costs

The October 2024 Budget raised the stamp duty surcharge on buy-to-let and additional properties from 3% to 5%, effective October 31st, 2024.

What you’ll pay now: On a £300,000 buy-to-let property, your stamp duty increased from £14,500 to £19,500. That’s an extra £5,000 just for being a landlord or second-home owner. A 34% increase in your acquisition cost overnight.

For corporate buyers (companies purchasing properties over £500,000), the rate jumped to 17% from 15%. If you structured your property investments through a company to save tax, that advantage just got a lot smaller.

What you need to do: If you exchanged contracts before October 31st, 2024, you’re protected under the old rates even if you complete later. Going forward, you need to calculate whether property investment still makes financial sense at these new rates, and whether alternative structures like Real Estate Investment Trusts (REITs) or different jurisdictions might serve you better.

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4. Inheritance Tax: Your Pension Is No Longer Safe

From April 2027, inherited pensions will be included in your estate for inheritance tax purposes. Additionally, reforms to Agricultural Property Relief and Business Property Relief mean family businesses and farms face new 20% effective tax rates on succession.

The cost to your family: If you have a £500,000 pension and a £325,000 estate (using the nil-rate band), previously only your estate was taxable. From April 2027, your total £825,000 could face inheritance tax, potentially costing your heirs an extra £200,000 at the 40% rate.

The Treasury estimates these inheritance tax measures will raise over £2 billion in the final year of the forecast period. That money comes from families like yours who thought they’d planned properly.

AIM shares (Alternative Investment Market) now receive only 50% relief, setting the effective inheritance tax rate at 20% instead of zero. If you invested in AIM for IHT efficiency, your strategy just broke.

5. The Threshold Freeze: The Hidden Tax Rise Costing You £33.5 Billion

The most insidious tax increase is the one barely discussed—the extension of the income tax threshold freeze to 2028. Your Personal Allowance stays frozen at £12,570, and the higher-rate threshold remains at £50,270.

As Sky News analysis revealed, this “fiscal drag” will raise an estimated £33.5 billion a year by 2028-29. That’s more than all other tax rises combined.

How it hits you: With inflation, your salary increases, but the thresholds don’t. Someone on minimum wage working just 18 hours a week will now pay income tax. If you earn £50,000 and get a 3% annual raise, within two years, you’re a higher-rate taxpayer despite your purchasing power staying flat.

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Beware of Speculation

It’s important to be cautious. You’ll see a lot of videos and articles out there making bold predictions about tax changes. Some might even tell you how to prepare for them. But honestly, nobody knows for sure what will happen until the budget is announced. Remember when everyone was predicting capital gains tax would become income tax? It never happened, but people planned around it anyway. It’s best not to get caught up in that kind of speculation.

Potential Tax Changes to Watch

So, where could taxes actually change? Let’s consider a few possibilities:

• Personal Allowance: This has been frozen at £12,570 for a while, and it’s expected to stay that way. But could it be reduced? It’s a possibility.
• Savings Allowances: Things like the £1,000 tax-free interest allowance and the £500 “starting” savings allowance could be looked at. ISAs might also be on the table.
• Wealth Tax: There’s talk of introducing a wealth tax. This could bring in a lot of money, but there’s a concern that it might cause wealthy individuals to leave the UK, which wouldn’t help the economy.
• New Income Tax Band: Could there be a new 50% tax band for high earners, perhaps those making over £250,000? It’s something that might be considered.
• Corporation Tax: Currently, there’s a two-tier system. It’s possible a new banding could be introduced, or the current 19% rate for smaller profits could be scrapped, leading to a flat 25% for everyone. This would affect larger businesses more.
• Inheritance Tax (IHT): While IHT brings in less than 1% of total tax receipts, it’s worth noting that from April 2027, pensions will be included as part of your estate. This could significantly increase the amount collected, potentially doubling it. However, this change is for the future and won’t help with the immediate deficit.

Join the Live Budget Webinar

With so many questions and potential changes, it’s a good idea to stay informed. We’re hosting a live webinar on November 26th, 2025, at 8 pm. We’ll be breaking down Rachel Reeves’ announcements as they happen, discussing the implications for you, and sharing potential solutions. It’s the best way to get accurate information and understand what the budget means for your tax situation. We’ll also be answering your questions live.

Why DIY Tax Planning Fails (And What It Costs You)

The internet is full of tax “tips” and generic advice. Here’s what most people don’t realize: tax planning without expertise doesn’t save you money—it costs you.

Common costly mistakes:

• Implementing stamp duty “schemes” that HMRC challenges, resulting in the tax plus penalties plus legal costs
• Setting up offshore structures without understanding the UK’s transfer of assets abroad rules or Controlled Foreign Company legislation
• Making pension contributions without checking the tapered annual allowance, triggering tax charges
• Gifting assets to family without considering Capital Gains Tax holdover relief, creating immediate tax bills
• Structuring property ownership incorrectly, preventing optimal use of reliefs

A YouGov poll of 6,500+ Brits showed almost 1 in 3 adults believe Rachel Reeves should avoid raising taxes even if it means cutting spending. But political opinions don’t change tax law—what matters is understanding the rules as they actually exist and working within them intelligently.

Professional advice isn’t an expense; it’s an investment that typically returns multiples of its cost through avoided penalties, optimised structures, and captured reliefs you’d never have known existed.

UK Tax Expert

Simon Misiewicz is a leading UK–US cross-border tax specialist with deep expertise in property taxation, international structuring, and dual-jurisdiction planning. He advises landlords, business owners, and globally mobile families on the complex interaction between HMRC and IRS rules, including PFIC reporting, treaty relief, corporate structuring, and multi-layered estate and succession planning.

With extensive experience supporting clients who operate, invest, or relocate across the UK–US corridor, Simon is recognised for translating highly technical tax legislation into clear, commercially focused solutions. His work frequently covers areas such as LLP and company structuring, US ECI and permanent establishment issues, UK payroll for US employers, dual-filing compliance, and the growing challenges posed by hybrid arrangements and HMRC Spotlight interventions.

Simon also provides specialist guidance on Family Investment Companies, inheritance tax planning, multi-generational wealth strategies, and cross-border pensions—particularly in cases where UK and US rules diverge sharply.

Through his advisory work, published guidance, and ongoing contributions to the professional community, Simon helps clients navigate increasingly complex tax environments with clarity, precision, and long-term strategic insight.