The United Kingdom is bracing itself for a pivotal fiscal moment as Chancellor Rachel Reeves prepares to deliver the government’s annual Budget on November 26, 2025. Facing a daunting £30 billion fiscal shortfall, Reeves finds herself caught between her party’s manifesto promises and the hard realities of a shifting global economic landscape. The choices she makes in the coming weeks will ripple across households, businesses, and markets, shaping the country’s financial direction for years to come.
According to reporting from multiple sources including BBC and Press Association, the Treasury’s own forecasts leave Reeves with little room to maneuver. The government has pledged not to raise income taxes, national insurance, or VAT—key taxes that hit working people’s wallets directly. Yet, with the Office for Budget Responsibility (OBR) expected to lower productivity growth forecasts by 0.2%—each percentage point worth a staggering £10 billion in tax revenue—the fiscal squeeze is tightening. Add to that the cost of lost revenues after MPs rebelled against welfare reforms and the rising burden of debt interest payments, and it’s no surprise that Reeves is under pressure to find alternative sources of revenue.
“I’m determined not to increase those key taxes that working people pay,” Reeves told ITV’s Good Morning Britain. “The manifesto stands, and it stands for a reason.” But she also acknowledged to BBC Radio 4’s Today programme that, “the world has changed, and we’re not immune to that change,” referencing increased global borrowing costs and trade barriers, as well as ongoing wars in Europe and the Middle East. Reeves declined to repeat last year’s promise that the government would not return with “more borrowing or more taxes,” signaling that tax rises in other areas are likely on the table.
So where might those tax hikes land? Analysts and investors are watching closely, especially as speculation swirls around a range of possible measures. One likely move is the freezing of personal tax allowances. Currently set until 2027/28, extending the freeze to 2030 could quietly pull more earners into higher tax brackets, raising billions without technically increasing rates. This strategy has been used before and can impact personal incomes and discretionary spending, potentially weighing on economic growth.
Another area under review is Individual Savings Accounts (ISAs). The government’s spring statement committed to a thorough review, and there’s talk of reducing the annual cash ISA limit from its current £20,000 or creating an additional allowance specifically for equities, possibly targeting small-cap stocks. While reducing the cash allowance has drawn criticism, an increased equity allowance could encourage more investment in UK-listed shares, though the outcome remains uncertain.
Dividend income is also in the crosshairs. The tax-free dividend allowance has shrunk dramatically—from £5,000 just a few years ago to £500 today. While lowering it further may be impractical, Reeves could align dividend tax rates more closely with income tax rates. Such a move would erode dividend income, particularly for basic rate payers, including many pensioners who rely on dividends. As the regime tightens, finding tax-efficient ways to invest—such as through ISAs or SIPPs—becomes more crucial than ever.
Pensions, too, may face significant changes. Currently, pension tax relief costs the Treasury up to £50 billion annually. Reducing this relief, especially for higher-rate taxpayers, is under consideration. “The government might target higher and additional rate contributions and leave relief for basic rate payers, for instance by levelling all relief down to the basic rate,” notes BBC. Alternatively, an annual levy on pension fund values or restrictions on the 25% tax-free lump sum could be introduced. Such measures would have major implications for retirement planning, particularly for those with larger pension pots.
Property taxes are another hot topic. There’s strong speculation that Capital Gains Tax (CGT) could be applied to the sale of primary residences exceeding a certain value, or that new, higher council tax bands might be introduced. The Chancellor may also consider allowing homebuyers to spread the cost of stamp duty, or even imposing national insurance contributions on landlords’ rental income. The last Budget already raised CGT rates and slashed the annual exemption allowance from £12,300 to just £3,000, and further reductions seem possible. These changes could have knock-on effects on savings, investments, and the broader property market—potentially impacting housebuilder and estate agent stocks.
Wealthier Britons may also feel the pinch. Possible increases in VAT on luxury goods such as cars and yachts, as well as higher air passenger duties on private jets, are being discussed. While such measures are unlikely to transform the country’s fiscal outlook, they play well politically and could raise modest sums. Inheritance tax (IHT) is also under review, with plans to include unused pension pot values in estates and possible simplification of complex gifting rules to increase revenue.
Banks and bookmakers are not immune, either. UK bank profits have risen in recent years, making them a tempting target. The bank surcharge—currently 3% on top of the main corporate tax rate of 25%—could be raised, and rules could change so banks pay tax on interest received from the Bank of England. Bookmakers are bracing for hikes in online gambling duties, with proposals ranging from raising Remote Gambling Duty from 21% to 50% to increasing Machine Games Duty and General Betting Duty. Such moves could hit bookmaker shares hard.
Energy companies, particularly those operating in the North Sea, are watching closely as well. The Energy Profits Levy (EPL) currently stands at 38% and is slated to end in 2030, but there’s speculation it could be maintained or even increased if oil and gas prices stay subdued. Calls to end the EPL seem to be falling on deaf ears, and any changes would directly impact major players like Shell, BP, Ithaca, and Harbour Energy.
Amidst all these potential tax changes, Reeves is also keen to reinforce the government’s pro-growth agenda. She has unveiled plans to guarantee work for long-term unemployed youth on universal credit for 18 months, with those refusing job offers at risk of losing benefits. “We will reduce child poverty, but we’ve also got to make sure the numbers add up,” she told BBC Breakfast, highlighting the delicate balance between social policy ambitions and fiscal discipline.
Political rivals are sharpening their attacks. Conservative leader Kemi Badenoch accused Labour of preparing to raise taxes, saying, “Nobody should be in doubt: the Labour Government is about to raise your taxes. Only the Conservatives are committed to living within our means so we can lower tax.” Meanwhile, Reeves continues to defend her party’s economic record, expressing pride in what has been achieved so far, even as she admits, “There’s more to do.”
With the Budget just weeks away, investors, businesses, and ordinary Britons are holding their breath. The decisions made will not only determine the immediate fiscal health of the country but will also send a signal about the government’s broader economic philosophy. Whether Reeves can navigate the tightrope between fiscal responsibility and social ambition remains to be seen, but one thing is clear: this Budget will be watched more closely than any in recent memory.
