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With the Budget 2025 due on 26 November, the big question is: how much will it cost you? From rumoured income tax hikes, to mansion tax and inheritance changes, and the potential impact on mortgages, here’s what to expect – and how to prepare.
KEY INFORMATION
With the Budget 2025 around the corner on 26 November, we look at how much it will cost you, based on current predictions which include:
We also look at the impact the 2025 Budget will have on mortgage rates.
And look at how you can prepare for these increased Budget 2025 costs by making sure you’re on the cheapest mortgage, cutting your energy bills and by making money out of your house if you can.
Before coming to power last year, Labour pledged in its manifesto that it wouldn’t raise national insurance, income tax or VAT.
After already raising employer NI contributions in her 2024 Budget, it was heavily rumoured that Rachel Reeves was going to break this pledge and hike income tax in the Budget 2025.
It was speculated that the Treasury was considering a Resolution Foundation idea to increase income tax by 2p and reduce employees’ National Insurance by the same amount. The think tank says this could raise £6 billion and hit higher earners more.
However, Hargreaves Lansdown’s Sarah Coles warned this would also hit self-employed people who pay income tax, but not employee NI. And some pensioners would also be hit harder by this proposed Budget 2025 change.
Other commentators speculated the Chancellor may add 1p to the basic rate of income tax, hiking it from 20% to 21%.
Budget 2025 update: But on Thursday 13 November, the Financial Times reported that the Chancellor has now backed down from increasing the main income tax rates.
Changes to income tax thresholds are though still on the menu, instead of income tax hikes, according to reports.
However, officials are said to have since rejected this, with the Chancellor now expected to make a series of smaller tax rises instead.
Another route the Chancellor may take is to freeze income tax thresholds for longer, reports The Telegraph. The thresholds, including the £12,570 tax-free personal allowance, were first frozen by the Conservatives in 2021. This freeze is set to last until 2028 – and Rachel Reeves has committed to it ending then at last year’s Budget.
When these thresholds are frozen, over time, more workers are pulled into higher tax rates due to increasing wages. The freeze forced an extra 520,000 taxpayers into the 40p bracket in the last year, according to estimates by HMRC.
However, the Government could decide to extend this freeze next year instead.
Changes to inheritance tax are also being eyed up as a way to raise more cash in the Budget 2025, according to reports, with changes being considered said to include:
Under current inheritance tax rules, no tax is due on any gifts you give if you live for 7 years after giving them – unless the gift is part of a trust. This is known as the 7-year rule.
If the person dies within 7 years of giving a gift and there’s inheritance tax to pay on it, the amount of inheritance tax due after your death depends on when you gave it. Read more in our guide What are Rachel Reeves’ inheritance tax changes?
You don’t have to make life’s big financial decisions alone. Get the right IFA for you today with our partners at Unbiased.
It has been widely speculated that a mansion tax will be introduced in the Budget 2025. This is rumoured to be in the form of a 1% levy on properties worth at least £2 million, with an annual charge of 1% of the amount over that threshold.
If the mansion tax goes ahead as proposed, if your property is worth more than £2 million, you’ll pay 1% of the amount above that threshold as a tax each year.
For more information, read our guide on the proposed new property taxes.
It has also been suggested that the Budget 2025 will announce that the current exemption from capital gains tax under private residence relief will end for properties above a certain price threshold – rumoured to be £1.5 million.
Here’s how much this would cost you if you bought a property 10 years ago for £1 million and it’s now worth £2 million.
This example assumes you’re a higher-rate taxpayer and doesn’t take into account the CGT tax-free allowance, or any deductions you may be able to claim. For tax advice tailored to you, we recommend speaking to an Independent Financial Adviser.
| Property price when bought | £1,000,000 |
| Property price when sold | £2,000,000 |
| Capital gain | £1,000,000 |
| CGT rate | 24% |
| CGT bill | £240,000 |
It has also been speculated that the Budget 2025 will announce that stamp duty will be replaced with a national property tax, which would be paid by owners of high-value properties when they sell them. Read more in our guide on the Proposed new property tax latest.
It’s rumoured that landlords could be in line for further tax hikes with the Treasury looking at their income as if it had been earned from a job.
According to reports, profits from lettings could be made subject to National Insurance or a separate tax rate may be created for rental income.
The Chancellor may be planning to slash the £20,000 annual ISA allowance for people saving into a cash account.
Under these proposals, the amount that could be saved into a stocks and shares ISA would remain the same.
Many employees use ‘salary sacrifice’ to save into their workplace pension. This can be tax-efficient for employees and employers, as pension contributions (unlike salary payments) are not subject to income tax or National Insurance.
However, according to reports, the Treasury could introduce a new annual £2,000 threshold that can be saved into a pension via salary sacrifice.
After this, National Insurance will apply at the usual rates of 8% on salaries under £50,270 and 2% on income above that.
In November 2025, we’ve seen the best mortgage rates falling, amid the expectation that interest rates will be cut sooner than previously expected.
However, what’s announced in the Budget 2025 could have an impact on that.
John Wyn-Evans, head of market analysis at the wealth manager Rathbones, says: “If the Budget is perceived as fiscally responsible – focusing on tax rises or spending restraint rather than giveaways – it could reinforce expectations of lower rates. However, any signs of fiscal slippage or overly optimistic growth assumptions could have the opposite effect, pushing up borrowing costs.”
With household budgets already stretched, the prospect of having to pay more tax due to the Budget 2025 will leave many people worried about how they’ll be able to afford it.
While you can’t change the tax rules, you can make sure you do everything in your power to manage your finances as well as possible and see if you can earn more money from your home too.
Making sure you’re on the best mortgage deal is one of the easiest ways to cut household bills.
Get fee free mortgage advice from our partners at L&C. Use the online mortgage finder or speak to an advisor today.
As well as saving on your outgoings, also see if you can increase the amount of money you have coming in. For example, could you make money by:
Find more about these and other ideas in our guide How to make money from your home.
The Budget 2025 date is Wednesday 26 November 2025.
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