Which taxes could increase in the future as the chancellor tries to balance the public finances?

During one of her first speeches as chancellor, Rachel Reeves spoke of a significant “black hole” in the public finances. Since taking her post, Reeves has been attempting to find ways to increase tax revenue and balance the books, so she can close this gap.

Up until now, the chancellor has opted to increase certain taxes including Capital Gains Tax (CGT) and National Insurance contributions (NICs) for business owners.

However, despite these changes, the public finances are still in a difficult position. As such, you might be concerned about further tax increases in the future.

Here are four tax changes the chancellor could introduce as she tries to balance the books.

1. Introducing a “wealth tax”

In recent months, the chancellor has come under pressure to introduce a “wealth tax”.

There are no fixed details about what this would look like, but some proposals suggest a levy of 1% or 2% on total wealth that exceeds £10 million.

Other alternatives could include a tax on specific assets such as property or stocks and shares.

While the chancellor has publicly stated that she opposes the idea of a wealth tax, there is support for the policy, both within the party and among the general public.

According to MoneyAge, 49% of those surveyed said they strongly supported a tax of 2% on wealth that exceeds £10 million. A further 26% “somewhat supported” the policy.

As such, there is a chance that the government could introduce a wealth tax in the future.

2. Extending the freeze on Income Tax thresholds

Freezing certain thresholds is one way the government could indirectly increase tax revenue.

For example, the Personal Allowance – the amount you can earn before paying Income Tax – has been frozen at £12,570 since April 2021. The threshold for paying the higher rate of 40% has also been set at the same level since 2021, and the additional-rate threshold was reduced in April 2023.

This means that, as average wages increase, more of your earnings could be pushed into the taxable range and you may move into a higher tax bracket. This indirect method of raising revenue is often called “stealth taxation”.

Income Tax brackets are set to remain at their current levels until April 2028. According to the Office for Budget Responsibility (OBR), the freeze is expected to raise an estimated £29.3 billion a year by 2027/28.

Many people expected Rachel Reeves to extend the freeze in her 2024 Autumn Budget, but she didn’t. This may have been because she previously promised not to increase Income Tax and, while not a direct tax rise, extending the freeze could be seen as breaking this guarantee.

However, as the chancellor looks for more ways to balance the public finances, there is much speculation that she could reverse this policy and set Income Tax thresholds at their current levels beyond April 2028.

3. Changing pension tax rules

Your pensions have several significant tax benefits. In the lead up to a fiscal event, there is often speculation about whether the government will remove some of these advantages to raise more revenue.

For example, prior to the 2024 Autumn Budget, there were concerns that the government would reduce the size of the tax-free lump sum you can take when accessing your pensions. Alternatively, the government could cut the tax relief you benefit from when contributing to your pension.

More recently, HMRC released research it conducted into salary sacrifice and potential changes the government could make.

Under the current rules, you can “sacrifice” a portion of your salary in exchange for pension contributions. This tax-efficient method of contributing to your pension could mean you pay less Income Tax, and both you and your employer pay reduced NICs.

According to PensionsAge, the HMRC research assessed the attitudes of business owners towards proposed changes to salary sacrifice. The changes included:

Removing the NI exemption for employers and employees
Removing all exemptions for employers and employees
Removing the NI and Income Tax exemptions for employers and employees, but only on salary sacrificed above £2,000.

While the government has not announced planned changes to salary sacrifice, the fact that this research was published in recent months suggests that it is a policy the chancellor could consider.

If changes to pension tax rules do come into effect, it could be more difficult to make tax-efficient contributions to your retirement savings in the future.

4. Further changes to Inheritance Tax

In her 2024 Budget, the chancellor announced several significant changes to Inheritance Tax (IHT).

These included:

Freezing the “nil-rate band” – the amount you can pass on to your loved ones without IHT – at £325,00 until April 2030. This also applies to the “residence nil-rate band” of £175,000 you benefit from when passing your main home to a direct descendant.
Reducing tax relief on agricultural and business assets
Ending the IHT exemption for pensions from April 2027.

While the government hopes to raise a significant amount of revenue from these changes, there are many other ways the chancellor could adjust IHT in the future.

For instance, she might reduce the nil-rate bands or even increase the rate at which your beneficiaries pay IHT. Alternatively, the chancellor could adjust gifting rules, making it more difficult to pass wealth to your loved ones while alive.

It is important to avoid any premature changes to your financial plan

These are just some of the ways that the chancellor might increase taxes in the future, and in the lead up to a fiscal event you will likely see lots of speculation in the media.

You may worry about how potential tax rises will affect you and may even consider adjusting your financial plan to deal with expected changes.

However, we can’t know for sure what the chancellor will announce, and any premature adjustments could disrupt your financial plan unnecessarily, especially if the expected changes don’t materialise.

That’s why it’s important to avoid basing decisions on speculation and rumours.

When changes do come into effect, we can support you and find ways to potentially mitigate a large tax bill.

Ultimately, this means you can continue working towards your long-term goals, despite any tax increases that might affect you in the future.

Get in touch

If you are concerned about future tax rises, we can support you.

Please contact us at hello@ardentuk.com or call or WhatsApp us on 01904 655 330. As an award-winning financial advice company with advisers included in the 2025 VouchedFor Top Rated guide, you can be sure that we’re a bona fide company providing excellent advice and high-quality service.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate estate planning or tax planning.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.