Autumn Budget 2025

Tom Goddard, Senior Associate notes:

HMRC’s latest statistics show tax receipts are still growing above inflation. Excitement over the Ashes, which started today also continues to grow, and Rachel Reeves will be hoping her own ‘Test Match’ this week does not crumble in the same manner.

Despite rising receipts, Reeves confronts slow economic growth, high borrowing, and speculation surrounding her fiscal plans. The Budget is set to test whether incremental tax rises can coexist with the Government’s stated ambition to unlock long-term growth.

Policy Context: Tax Receipts Climb, But So Does Borrowing

We do know that total HMRC receipts are nearing the coveted £900bn mark for a 12-month period, in fact they are £896.7bn for the period between November 2024 to October 2025. The 12 months prior were £842.3bn and before that, £816.4bn.

The growth is broad-based:

• Income tax receipts are up 10% year-on-year
• National Insurance Contributions have increased 8%
• VAT receipts have risen 4%, reaching £176.2bn

Much of this growth reflects the continuing impact of fiscal drag – frozen thresholds pulling more individuals into higher tax bands as wages rise.

However, rising receipts are not translating into fiscal headroom. Government borrowing for the first seven months of the fiscal year has reached £116.8bn, placing greater importance on Reeves’ ability to set out a credible path to growth.

Implications for Businesses and Households

1. Rising tax burdens without explicit tax hikes

The freeze in income tax thresholds continues to increase effective tax rates for millions, particularly those receiving inflation-linked pay rises. Businesses may feel indirect pressure as higher personal tax burdens reduce consumer disposable income and increase wage demands.

2. No indication that tax rises will slow

The Budget has been beset with rumours of what she has been planning… everything from income tax rises to threshold changes, to changing gifting rules and even taxing milkshakes.

Even if many of these do not materialise, the direction of travel suggests that both businesses and individuals should expect a structurally higher tax environment in the near term.

Economic Reality: Growth, Not Revenue, Is the Bottleneck

For the Chancellor tax should not be the primary concern of this Budget. Revenues from all major tax streams are consistently rising and will continue to do so. Instead, she should focus on addressing the UK’s weak growth forecasts which showed only a 0.1% GDP growth figure in Q3 2025 on Q2 2025.

Tom concludes:

If the UK economy experiences some real growth, tax takings and revenue for the Government will naturally rise as a result of this. As to the question of how to encourage growth, encourage investment through tax policies that reward success and don’t punish it should be at the top of the batting order.

For businesses, this underscores the importance of creating an investment climate that supports innovation, productivity, and capital formation – areas where stability and clarity in tax policy are essential.

Potential Outcomes: What to Watch for on Budget Day

While uncertainty remains, several themes are likely to shape the Chancellor’s decisions:

• A continued focus on fiscal responsibility given high borrowing levels
• Possible adjustments to thresholds or allowances that increase revenue without headline rate rises
• Targeted incentives to promote business investment and productivity
• Revisions to wealth, inheritance, or gifting rules as part of a broader revenue-raising strategy

The balancing act between short-term revenue needs and long-term growth imperatives will determine whether this Budget sets a sustainable fiscal course.

What You Should Consider / Do Next

For businesses:

Model the impact of continued fiscal drag on employee net pay and compensation expectations.

Review investment plans in anticipation of potential incentives or reliefs aimed at stimulating growth.

Strengthen cash-flow planning, assuming a persistently high-tax environment.

For individuals:

Assess your exposure to threshold freezes, particularly if salary increases risk pushing you into higher bands.

Consider early planning around gifting, inheritance, or wealth transfers, given ongoing speculation.

Stay alert to consumption tax changes, especially if operating in retail, hospitality, or consumer goods.

Would you like to know more?

If you would like to discuss any of the above, please speak to your usual Blick Rothenberg contact