As Chancellor Rachel Reeves prepares to deliver her second Budget next month, speculation is building about what might be announced. History shows, however, that making financial decisions based on rumours can easily backfire.
In this context of uncertainty, it’s sensible to step back, understand the themes being discussed – and then wait for the actual Budget on 26 November before taking action.
At a glance
- It’s widely expected that there will be tax rises in the Autumn Budget on 26 November, as Rachel Reeves looks to fund spending commitments and address fiscal pressures.
- Media speculation has focused on possible changes to property taxes, inheritance tax, gifting rules, pensions and ISAs.
- Many of these rumours are unlikely to materialise, underlining the importance of taking a measured, evidence‑based approach before changing your financial plans.
Budget 2025 rumour: pensions reform
Pensions attract speculation before almost every Budget – and this year is no different.
In the run‑up to last year’s Budget, there were rumours that the 25% tax‑free cash entitlement from pensions would be cut. That change did not happen, but the same rumour has resurfaced ahead of this Budget.
Some savers may feel tempted to take their 25% tax‑free lump sum early “just in case”. HMRC has already warned that tax‑free pension withdrawals cannot be reversed. For example, if someone with a £200,000 pension pot takes £50,000 as tax‑free cash just before the Budget, they cannot rely on a 30‑day cooling‑off period to undo that withdrawal if the rules remain unchanged.
There is also speculation about changes to pension tax relief. Because relief is relatively generous – especially for higher and additional‑rate taxpayers – it is often seen as a potential way for the Treasury to raise revenue. Cutting relief, or moving to a flat‑rate system, would almost certainly attract criticism for undermining confidence in pensions, something St. James’s Place has publicly warned against.
Budget 2025 rumour: an overhaul of property taxes
Another area attracting attention is property.
Ideas floated in the media include:
- Replacing stamp duty with a property tax. Some outlets reported that the Treasury had considered a national tax, paid by owner‑occupiers on properties worth more than £500,000 when they sell.
- Spreading stamp duty payments over several years, to support the housing market.
- Scrapping council tax, potentially alongside new, higher council tax bands.
- Applying Capital Gains Tax (CGT) to the sale of primary residences above a certain value.
- Targeting landlords by applying National Insurance to rental income.
If any of these ideas appear in the famous red Budget box, they could have a particular impact on owners of higher‑value homes – especially in regions such as London and the South East – and on buy‑to‑let investors.
Budget 2025 rumour: ISAs and inheritance tax
Proposals to cut the cash ISA allowance were shelved in July after a strong backlash, but Labour has not ruled out future changes. Rumours of a possible reduction have now resurfaced.
Building societies previously warned that cutting the cash ISA allowance could affect their ability to lend to homebuyers, who often build deposits in cash. At the same time, the government is keen to encourage more people to invest, rather than hold large sums in cash. It is therefore possible that ISA rules could be reshaped to support that objective.
Inheritance tax (IHT) is another area under scrutiny. Potential changes being discussed include:
- Extending the period a donor must survive after making a substantial gift for it to fall outside their estate for IHT purposes – for example, from seven years to 10 years.
- Introducing a lifetime cap on the total value of IHT‑free gifts an individual can make.
None of these changes is confirmed, but they illustrate the breadth of ideas being explored.
Budget 2024: what did and didn’t happen?
Experience from the 2024 Budget is a helpful reminder that rumours are often a poor guide to reality. Ahead of last year’s announcements, several high‑profile predictions were made:
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Changes to pension tax relief – Cutting relief or moving to a flat rate were widely discussed.
- Outcome: NO CHANGE
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Reducing pension tax‑free cash – Intense speculation that the 25% tax‑free entitlement would be cut led to unprecedented withdrawals.
- £18.08 billion of tax‑free lump sums was taken in 2024/25, up 61% from £11.25 billion the previous year.
- Outcome: NO CHANGE
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Inheritance tax (IHT) on pension savings – The BBC reported that the government wanted to raise more via IHT, with rumours that pensions could be brought into scope.
- Outcome: CHANGE – pensions were brought into the IHT net.
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Tightening IHT gifting rules – Suggestions included extending the seven‑year rule to 10 years, introducing a lifetime cap on gifting, and restricting the “unlimited gifts from income” exemption.
- Outcome: NO CHANGE
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Increasing Capital Gains Tax (CGT) – Predictions that CGT would rise proved accurate.
- Basic‑rate CGT on share disposals increased from 10% to 18%, and the higher rate from 20% to 24%.
- Outcome: CHANGE
The lesson is clear: some rumours do become reality, but many do not – and reacting too quickly can be costly.
Don’t try to predict the future
It’s impossible to know precisely what will be announced on 26 November, but it is highly likely that not all current rumours will come to pass.
A useful question to ask yourself is: how would I feel if I took action now, based purely on speculation, and the change never happened, leaving me in a worse position?
In most cases, it is better to:
- Stay calm amid the headlines
- Avoid knee‑jerk decisions
- Wait for the confirmed detail of the Budget
- Review your position with a qualified financial adviser
Important information
The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.
The levels and bases of taxation, and the reliefs from taxation, can change at any time and depend on individual circumstances.
