It does nobody any good to predict what the 2026 Autumn Budget might bring us in late October, or to pay heed to rumours circulating. I believe it’s far more sensible to consider what advisers should have on their radar at present, because at some stage the new government could choose to pull a handful of tax levers. Let’s look at each in turn.
Property/wealth-adjacent reform
A cluster of often co-discussed ideas have surfaced. One involves bringing in additional ‘mansion’ tax-style measures, perhaps fuelled by calls from some for more tax on wealth, not income. Another lever – one with a more widespread impact – would be reforms to council tax and business rates, affecting homeowners, tenants, landlords and companies with premises. These two areas of taxation have seen few meaningful changes in decades.
On this front, there’s been early-stage thinking about a land value tax, creating an annual levy on the unimproved value of land, excluding buildings and other improvements. This could replace or supplement existing property taxes such as council tax and stamp duty. Those in favour contend this would be more efficient and equitable, while critics foresee valuation challenges and possible impacts on house prices.
Indexation allowance returning
Some would say a straightforwardly positive and sensible reform to capital gains tax (CGT) would be to see the reintroduction of indexation relief. The relief would account for the impact of inflation on capital gains and reduce the tax chargeable. As we know, this inflationary relief was removed for individuals in 2008 after being briefly replaced by taper relief.
Bringing back some kind of indexation could act as a carrot for investors as it would recognise that many years of inflation have eroded the real gains achieved on long-held assets.
CGT/income tax alignment
Amid continued fiscal drag and with frozen personal tax thresholds possibly extending even further into the future, narrowing the gap between CGT and income tax is a tax lever some commentators view as overdue. This change could involve further increases to CGT rates and reduced exemptions, with the aim of boosting tax receipts while creating what some would view as a better-balanced taxation system.
Increasing middle earner taxation
Another option would be doing something with middle earners. Government spending plans remain under pressure owing to the ageing population, the long war in Ukraine, higher energy and agriculture costs owing to the US-Iran conflict, the on-off trade war with the US, and potential conflict with Russia requiring more investment in defence capabilities.
One way to swell the Treasury’s coffers could entail targeting those in the £40,000 income bracket, as, even after recent increases, this cohort pays comparatively less tax when compared to most of our international peers in the G7 and OECD.
Practical steps for advisers
Regardless of what actually ensues with the forthcoming Budget, there are several actions advisers can consider taking now for the advantage of their clients:
- Review holdings exposed to CGT
- Revisit gifting and property-related planning
- Keep reviews related to pension wrappers and IHT up to date
One aspect worth bearing in mind is that lead times are often built into the tax measures announced in Budgets, with some involving lengthy consultation periods. This allows time to respond to changes before they come into force. As always, cool heads prevail in our sector.
This piece was written by Michael Edwards, Managing Director at Financial Software Ltd (FSL).