Autumn Budget 2025

With public finances under acute pressure and the Government signalling a need for substantial revenue-raising measures, several of the policies reported in recent weeks could fall hardest on retired people –  especially those who continue working or who own property but live on modest incomes.

Pensioners could be disproportionately affected by a combination of income tax changes, National Insurance reforms, property tax adjustments and the cumulative effect of earlier policy decisions.

Robert Salter, Director, said:

Pensioners, particularly those who are continuing to work after they have reached retirement age will be amongst the biggest losers from the various tax rises the Chancellor, Rachel Reeves is expected to announce.

Income tax rises and the burden on working pensioners

Recent reports indicate that the Chancellor is considering increasing income tax rates while simultaneously cutting National Insurance Contributions (NIC) for working-age people. While such a shift could redistribute the tax burden across the working population, it would leave pensioners exposed, as they do not pay NIC.

Lower-income working pensioners – a growing group now estimated at more than 1.1 million people – could therefore face higher tax bills without receiving the offsetting benefit enjoyed by employees and the self-employed.

Robert noted:

Other changes, such as the potential increase in the scope of National Insurance Contributions (NIC) to include letting income or imposing it on people who continue to work after having reached state retirement age of sixty-six would also hit a high number of pensioners. Current estimates suggest over 1.1 million pensioners are continuing to work after they have reached retirement age.

Any extension of NIC to rental income would also affect retired landlords, many of whom rely on letting out a single additional property to help meet rising living costs.

A possible ‘mansion tax’ and the challenge for asset-rich, income-poor pensioners

One of the more controversial policy ideas floated ahead of the Budget is an increase in council tax charges for owners of homes in Bands F to H. Media reports have framed this as a form of “mansion tax”, though many of the properties affected would not be considered luxury homes in parts of the country where house prices have grown far beyond wage growth.

Such a measure could hit older homeowners particularly hard. Many pensioners have lived in their homes for decades and have seen property values rise significantly — but their incomes have not kept pace.

Robert  highlighted this risk:

Many of the tax changes that have been rumoured in the run-up to this Budget could impact pensioners in particular. The so-called ‘mansion tax’, which might increase the council tax charges on people who own properties in council tax bands F to H, could be disproportionally painful for pensioners who have lived in their property for many years and are asset rich but income poor.

For those living alone or on fixed incomes, even modest annual increases in council tax can be difficult to absorb.

The cumulative impact of earlier policy changes

The Autumn Budget proposals do not exist in isolation. Both Conservative and Labour governments have made changes in recent years that have already placed additional pressure on pensioners’ finances.

Robert explained:

These changes would be on top of a number of other decisions that Governments, both Conservative and Labour, have taken in recent years which impact pensioners. Such as the removal of the Winter Fuel Allowance for some pensioners and the freezing of the personal tax thresholds since 2021, which has bought more and more pensioners into tax or higher rates of tax, where they were already taxable.

The freeze on income tax thresholds, which has now been in place for several years — is drawing increasing numbers of pensioners into the tax system, particularly as the state pension continues to rise under the triple lock. This “fiscal drag” means that even pensioners with modest incomes may soon become taxpayers for the first time.

At the same time, last year’s move to restrict the Winter Fuel Payment, later partially reversed, has left a cohort of pensioners permanently excluded from support at a time when energy bills remain volatile.

A politically sensitive moment

Any measures that impact pensioners disproportionately could be politically risky. Older voters represent a large and electorally engaged group; they are also among those most affected by the cost-of-living pressures that have persisted since 2022.

Robert concludes:

While there are no ‘easy tax rises’ for Rachel Reeves, it will be interesting to see whether she does go forward with these changes, as anything that does impact pensioners disproportionally may be quite controversial at a time when the Government is facing numerous challenges both economically and from a wider political perspective.

What pensioners should consider now

While the details will become clear only once the Chancellor delivers the Budget, pensioners,  especially those with additional income streams or high-value homes — may wish to:

• Review their likely tax position under potential income tax changes
• Consider how changes to council tax could affect their household finances
• Assess the impact of possible NIC expansion if they earn rental income or continue working
• Seek professional advice to understand available allowances, planning opportunities and mitigation strategies

Would you like to know more?

If you’d like to discuss the above, please speak to your usual Blick Rothenberg contact or Robert using the form below.