Tax landscape and constraints

Before diving into specific forecasts, it’s important for you to understand the context and constraints shaping this Budget.

Fiscal rules and shortfall

• The government has reaffirmed non-negotiable fiscal rules requiring that day-to-day spending be matched by receipts by around 2029-2030.
• The shortfall heading into the Budget has been variously estimated at around £20 – £40 billion.
• This means you should expect tax rises unless strong growth emerges., driven by the cumulative effect of multiple smaller adjustments rather than headline rate increases.

Political and manifesto constraints

• The government has publicly ruled out raising the three major taxes – income tax, VAT and National Insurance – for “working people”.
• That does not however rule out changes via “stealth” means: freezing thresholds, expanding tax bases, increasing wealth/property taxes, adjusting reliefs.
• There is much suspicion that while headline tax rates may not move, the structure and thresholds may.

Business and growth imperative

• There is strong stated objective of prioritising “renewal and growth through investment and reform”.
• Many commentators argue that the tax system remains overly complex and may be holding back investment and productivity. If you run a business, expect potential growth-oriented reforms alongside revenue-raising measures.
• Headlines ahead of this week’s budget leads with commentary which indicates that growth requires consistency and confidence in the Treasury as well as the ability to get public spending under control.

Key tax predictions

Business tax and investment incentives

To support the growth agenda, the Chancellor may announce business tax reforms aimed at investment, but balanced by revenue-raising elsewhere.

Arguments have been made for extending “full expensing” for capital investment to leased or rented assets, abolishing stamp duty on shares and reforming business rates. At the same time, you should prepare for possible curtailment or simplification of business tax reliefs , in order to raise revenue or offset the cost of investment incentives.

You should review your capital investment plans for tax efficiency, as such changes could make the UK a more attractive base for investment.

In potentially less positive news for business and ultimately consumers, there have also been rumours of structural changes to VAT to increase the tax base. This could be bad news if your business produces consumer goods, including food products, which might lose zero-rating.

Pensions, reliefs and retirement tax policy

With significant costs already associated with pension tax reliefs, the government may look to tighten reliefs for higher earners rather than introduce universal changes .

If you have a large pension pot, you’re likely to be affected, especially where relief at marginal income tax rates is significant. Future changes could limit relief or impose new restrictions.

You should consider alternative saving vehicles and review your retirement plans in anticipation of changes to how benefits are taxed.

Personal taxation and “stealth” tax measures

Rather than increasing headline rates of income tax or National Insurance, the Chancellor is likely to rely upon threshold freezes, fiscal drag and perhaps targeted changes to reliefs. Extending the freeze on the personal allowance, the higher-rate threshold or other thresholds is a strong possibility measure and serves as a workaround to raising the basic income tax rate – something that is less likely given the political constraints. Whilst it wouldn’t feel like a tax rise to most taxpayers, the inevitable result is that you may be pushed into the upper thresholds as incomes increase over time.

The possibility of an increase to income tax rates paired with a reduction in employee National Insurance contributions has also been mooted. If you earn income from dividends, savings, pensions, or rental property, this could increase your tax bill..

Property, wealth and high-value asset taxation

The government is likely to target wealth, property and high-value assets more aggressively than ordinary income.

Indirect property taxes are considered a strong candidate: for example, a new levy on high-value homes or a “mansion tax”, reforming stamp duty or extending capital gains tax (CGT) to primary residences above a threshold. Bringing rental income within the scope of National Insurance (or equivalent) is another idea which has been floated.

If you’re a landlord, property investor, or own high-value property, evaluate your exposure and re-strategise ahead of potentially tougher measures.

How we can support you

Overall, the Budget will likely be one of cautious balancing: raising revenue without alienating the government’s stated “working people” commitments, while trying to preserve an investment-friendly narrative. A real mixed bag for taxpayers and business.

While major rate rises may be politically constrained, we anticipate significant structural reforms and targeted tax-raising measures, especially geared towards wealth, property and high-value assets. At the same time, businesses and investors should look out for reform-friendly signals – particularly around investment incentives and growth-related tax policy.

It’s clear that change is coming, and the Budget should be treated as both a risk and an opportunity. Our Tax team is on to help you navigate these changes – please feel free to reach out to us with any questions or concerns.