Tax and Pension Reforms Ahead? What to Watch Before the 2025 Autumn Budget

The Treasury may extend employer National Insurance Contributions to partners in LLPs, who currently pay none on profit shares. If introduced from April 2026, partners in professional firms could see take-home income fall. For example, a GP earning £118,000 could lose around £7,000 annually. The move may be framed as a fairness measure. Increasing pension contributions and reviewing drawings, income, and allowances now could help offset potential changes. 

The 25% tax-free lump sum could be capped or reduced, with speculation around a lower limit or flat-rate tax relief of about 30%. Higher earners may lose some relief, while basic-rate taxpayers could gain. The best approach remains patience until details are confirmed. Pensions continue to offer unmatched benefits, including tax relief on contributions, tax-free growth, and flexible retirement access. Maximising current allowances before year-end could still prove valuable. 

Frozen thresholds since 2009 have drawn more estates into IHT. The government is reportedly reviewing lifetime gifting rules, possibly capping total tax-free gifts or limiting the “gifts out of income” exemption. If introduced, early and structured planning will be essential. Using trusts, life insurance, or Business Property Relief–qualifying investments could help manage exposure. For some families, accelerating gifts before any new limits apply may prove beneficial. 

Property taxation reform remains a recurring topic, with ideas ranging from stamp duty changes to a “mansion tax” on high-value homes. Extending Capital Gains Tax to main residences would mark a major shift, likely affecting homes over £1.5 million. While politically sensitive, such measures could be positioned as fairer taxation. Homeowners planning to sell or gift property should review valuations and timelines before the Budget and seek advice on implications. 

Applying National Insurance to rental income is under consideration, treating landlords’ profits as “earned” income. For those already facing higher rates and lower yields, this could tighten margins further. Some may attempt to pass on costs through higher rents, affecting demand. Landlords should stress-test portfolios, review income and expenses, and explore incorporation or debt reduction to protect long-term returns if the change is confirmed. 

Capital Gains Tax has already seen the annual exemption cut to £3,000, with further tightening possible. Higher rates or reduced reliefs, such as Business Asset Disposal Relief, would affect investors and business owners alike. Reviewing portfolios and realising gains under current rules may be prudent. For those selling a business or major asset, timing and structure will be key. ISAs, pensions, and spousal transfers can help mitigate exposure. 

Salary sacrifice schemes, popular for pensions and electric vehicles, could be scaled back. These arrangements currently reduce both income tax and NICs but may be viewed as overly generous to higher earners. Any restrictions could reduce savings rates and push more people into higher tax bands. Keep arrangements under review and be ready to adjust if the Budget limits the benefits of salary sacrifice. 

A 2% rise in income tax across all bands could take effect from April 2026. Pensioners and those with investment or rental income would feel the full impact, while employees below £50,000 may see little change if an NI cut offsets the rise. Now is the time to review budgets, manage spending, and check whether salary sacrifice or spousal allowances can reduce tax exposure. Focus on cash flow and contributions until policy details are confirmed. 

A pay-per-mile system for electric vehicles is expected from 2028. Drivers would estimate annual mileage and pay a charge alongside vehicle tax, adjusted at year-end. Private motorists and businesses with electric fleets would face higher costs, though EVs should remain cheaper to run. Build this into future budgets – 10,000 miles could add around £300 a year. Tracking mileage, managing costs, and planning ahead will keep expenses under control. 

This year’s Budget may not bring major tax rises but could include several targeted adjustments. Collectively, these may reshape the landscape for higher earners, investors, and retirees. 

At Hoxton Wealth, our advice is simple: Prepare, don’t panic. Keep plans up to date, make full use of reliefs and allowances, and speak to your adviser before acting. Thoughtful, proactive planning remains the best protection against fiscal change. 

Check out our free guides, which look in detail at how the Budget could affect UK residents and expats.