UK Budget Preview: Tax Reforms and Economic Measures Under Scrutiny Ahead of Fiscal Statement

Fiscal Challenges and Revenue Requirements

Chancellor Rachel Reeves faces significant budgetary pressures as she prepares her fiscal statement, with analysts suggesting she may need to raise taxes to meet self-imposed financial rules. According to reports, the government requires approximately £22 billion to maintain its current £10 billion fiscal buffer, which represents one of the smallest margins a chancellor has allowed since 2010, compared to the period average of £30 billion.

Fiscal Challenges and Revenue Requirements
Potential Personal Tax Reforms
Property and Investment Tax Considerations
Business Sector Taxation
Inheritance Tax and Agricultural Assets
Cost of Living Support Measures
Youth Employment Initiatives

Potential Personal Tax Reforms

The government is reportedly considering extending the current freeze on income tax thresholds beyond their scheduled 2028 expiration. This mechanism, often described as a “stealth tax” because it draws more people into higher tax brackets as salaries rise, could generate significant revenue. Sources indicate Reeves has not ruled out such an extension when questioned by the BBC in September., according to additional coverage

Analysis from the Resolution Foundation suggests a potential restructuring of National Insurance and income tax rates. The think tank, which has connections to government members, reportedly recommends cutting 2p from employee NI rates while adding the equivalent amount to income tax. Such a move would disproportionately affect pensioners, landlords, and self-employed individuals who wouldn’t benefit from corresponding NI reductions.

Property and Investment Tax Considerations

Property tax reforms appear to be under serious consideration, with reports suggesting the government might replace stamp duty with an alternative property tax system. Additional measures could include increased taxes on landlords and potential replacement of council tax structures. Some analysts suggest capital gains tax might be extended to cover primary residences in certain circumstances.

Pension rules may also see modifications, with speculation about potential reductions to tax relief on contributions and changes to lump-sum withdrawal limits. While such measures would generate Treasury revenue, analysts caution they might reduce the attractiveness of pension savings. The chancellor has reportedly ruled out immediate reforms to cash Isas despite earlier speculation about reduced allowances.

Business Sector Taxation

The Treasury is reportedly examining increased taxation on specific business sectors, with the TUC union federation calling for higher taxes on online gaming companies and banking profits. The chancellor has acknowledged to ITV News that “there is a case for gambling firms paying more,” while industry reports suggest William Hill owner Evoke might close up to 200 betting shops depending on tax changes.

Inheritance Tax and Agricultural Assets

According to Sunday Times reporting, ministers are exploring potential modifications to inheritance tax rules affecting agricultural assets. The current policy scheduled for April 2026 would impose a 20% tax on inherited agricultural assets exceeding £1 million, which were previously exempt. However, Farming Minister Dame Angela Eagle has stated there is “no likelihood” of policy reversal, creating uncertainty about the final outcome.

Cost of Living Support Measures

The government is expected to address ongoing cost-of-living challenges through targeted interventions. Reports suggest potential action on energy bills through regulatory levy reductions or VAT cuts from the current 5% rate on energy. The chancellor has committed to “targeted action to deal with cost of living challenges” while inflation remains elevated.

Youth Employment Initiatives

In September, the chancellor announced a youth employment guarantee providing paid placements for young people unemployed for 18 months or longer. This initiative forms part of the government’s broader strategy to address workforce participation and skills development.

As budget preparations continue, analysts suggest the chancellor must balance revenue generation against economic growth concerns, with final decisions expected to reflect both fiscal requirements and political considerations.