Autumn Budget 2026: Tax Predictions

Background

The new prime minister, Andy Burnham, has previously signalled he will honour Labour’s election commitments not to increase rates of income tax, employee NICs or VAT at Budget 2026. He has also committed to capping the main rate of corporation tax at 25%, as confirmed in Labour’s Corporate Tax Roadmap published alongside Budget 2024.

At Budget 2024, the government raised the main rates of CGT (from 10% to 18% for basic rate taxpayers and from 20% to 24% for higher rate taxpayers). The government had been rumoured to be considering further increases in the CGT rates at Budget 2026, potentially to align them more closely with income tax rates. However, on 19 October, a little over a week before this year’s Budget, it was reported that the new Chancellor, John Healey, had ruled out increasing rates of CGT amid concerns this would undermine economic growth and discourage investment.

More broadly, Burnham and Healey have been widely speculated to be aiming for a cautious Budget, adhering to the fiscal rules set out by Healey’s predecessor, Rachel Reeves, and avoiding dramatic announcements which may spook markets.

Given these constraints, what tax revenue levers are left for the Chancellor to pull at Budget 2026? The details of this Budget have been more closely guarded than others in recent years, with fewer potential tax changes being reported in the press. Nevertheless, we can make several educated guesses regarding some of the likely tax announcements on 28 October.

Predictions

Tax increases

• Bank surcharge – The government is widely expected to increase taxes on the banking sector. This may manifest as a reversal of the April 2023 reduction (from 8% to 3%) of the corporation tax surcharge which applies to banking companies and building societies.

• Gambling taxes – Another clear target for tax rises is the gambling industry, with the government rumoured to be considering increasing machine games duty on slot machines.

• Income tax – The government could announce further increases in the rates of income tax which apply to dividends, savings and rental income, in order to raise additional tax revenue without breaching Labour’s election commitment not to increase taxes on “working people”. The dividend allowance (currently £500) could also be reduced.

• National Insurance Contributions – The government may consider extending NICs to rental income, increasing the NICs payable on self-employed income, or subjecting the employment income of workers over state pension age to NICs (although the latter two options would represent increased taxes on “working people”).

• Extending the freeze on income tax and NICs thresholds – The government could seek to generate more fiscal headroom by further extending the freeze on income tax and NICs thresholds beyond April 2031. This may be more politically palatable than increasing headline rates, but it would still significantly squeeze individual taxpayers through the effect of stealth tax rises.

• Property taxes – Burnham has previously ruled out abolishing or radically overhauling stamp duty land tax (SDLT) at Budget 2026. Although targeted reforms to SDLT are possible, there is little consistent pre-Budget speculation about what form such reforms might take. As noted above, the Chancellor has also ruled out increasing the rates of CGT, which would affect disposals of properties by landlords.

It was rumoured that the threshold for the high value council tax surcharge, which will apply from April 2028 to owners of residential property in England worth £2 million or more in 2026, will be reduced to £1.5 million, although this now appears to have been ruled out.

• Pensions – The government may introduce pensions-related tax changes, for example moving to a flat rate of pensions tax relief for all taxpayers. (A flat rate of, for example, 25-30%, would reduce tax relief for higher earners and further incentivise pensions saving for lower earners.)

• Inheritance – The government could increase inheritance tax receipts, for example by imposing a lifetime gifting cap and/or increasing the seven year rule (for example to ten years). In addition, the tax-free uplift in the CGT base cost of property to market value on death could be abolished.

• Tax evasion and avoidance – The government is expected to use the Budget to support its ongoing efforts to “close the tax gap”, aiming to increase tax revenues by targeting tax evasion and avoidance. For example, it has been reported that online marketplaces will be required to collect VAT on behalf of in-scope retailers which use their platforms, in order to reduce tax non-compliance by online retailers.

Tax cuts

The tax revenue generating measures set out above may be used to fund spending which includes tax cuts, although significant tax giveaways are generally not expected in this year’s Budget given the prevailing economic context and the government’s fiscal constraints.

Targeted reliefs may be introduced to mitigate cost of living pressures, including potentially an extension of the VAT zero rate to qualifying supplies of domestic electricity in Great Britain beyond 31 March 2027, and the application of zero rating to supplies of domestic gas (which are currently subject to a reduced 5% rate of VAT). The government could also decide to extend the temporary five pence per litre cut in the rates of fuel duty beyond 31 December 2026.

Other tax cuts could be introduced to support high street businesses, such as a reduced rate of VAT for the hospitality industry. An increase in the VAT registration threshold from £90,000 could be introduced to reduce the compliance burden on small businesses and encourage growth, but this may be unlikely given the threshold was increased relatively recently (in April 2024).

Other tax policy developments

• Devolution measures – Burnham has a clear agenda to move money and power away from Westminster. The Budget is expected to include further detail regarding plans to increase control by local mayors over business rates and income tax receipts. This could be presented as a devolution tax roadmap.

• Social care levy – The prime minister has also been vocal about his ambition to reform social care. However, it is unlikely that a targeted social care levy will be introduced at this Budget, given the plans for overhauling the social care system are at a nascent stage. Nevertheless, it is possible that a consultation on tax policy in this area could be launched at the Budget.

• Tax simplification – It would be very welcome if the government could use the Budget to ameliorate unhelpful tax-related inconsistencies and cliff edges. This could include the £100k “tax trap”, which means that individuals are subject to an effective income tax rate of 60% on taxable income between £100,000 and £125,140, due to the withdrawal of the personal allowance. A consultation in this area is more likely than an immediate change.

• Consultation outcomes – The government is expected to use the Budget to make tax policy announcements in response to recently closed consultations. This could include the following recent consultations, which are of particular interest to many of our clients:

• the consultation on proposals to update the distributions framework, which have the potential to significantly alter the tax treatment of extractions of value from companies by individual shareholders, narrowing the circumstances in which capital treatment is available;

• the consultation regarding potential reform to the taxation of UK resident individuals who are members of reverse hybrid entities, such as US Limited Liability Companies;

• the consultation seeking views on potential changes to the administration of treaty relief from the UK’s withholding tax regime on payments of interest to overseas lenders; and

• the consultation on the introduction of a new VAT zero rate for land intended for the construction of social housing across the UK.

• Finance Bill 2026-27 – The new Finance Bill will be laid before Parliament shortly after the Budget. Tax practitioners will want to understand how the draft legislation which was published in July 2026 has been amended following technical consultation.

An area of particular significance for those who advise on corporate transactions is the legislation which will implement the new securities transfer tax, a single tax on transfers of securities which will replace stamp duty and stamp duty reserve tax. It is hoped that the final version of the Finance Bill legislation includes a de minimis exemption and removes joint and several liability for agents. The consultation indicated that an update on the commencement date would be provided this autumn, so this will likely be confirmed at the Budget.

Conclusion

Given the economic and political context of this Budget, as well as the restrictions imposed by Labour’s fiscal rules, it seems unlikely that the Budget will include many measures to support UK economic growth by ameliorating the tax burden on businesses, which has been exacerbated by the increase in employer NICs since April 2025. However, the government’s announcement that CGT rates will not be increased gives some comfort to individual investors, and supports the hope that this Budget will be hallmarked by consistency and the avoidance of dramatic and destabilising tax changes.