The Autumn Budget 2026 What could happen?

The challenge facing Chancellor John Healey

One of the biggest issues facing the government is the rising cost of borrowing.

UK long term borrowing costs have climbed to their highest levels in decades. Recently, 30-year gilts hit 5.89%, their highest since 1998, while ten-year gilt yields rose to around 5.25%, the highest since 2008.[2] Higher gilt yields increase the cost of financing government debt. Both are well above the Office for Budget Responsibility’s predicted yield of 5.1% for this year.

Based on current market conditions, estimates suggest the Chancellor’s fiscal headroom could fall from around £26 billion at Rachel Reeves’ Spring Statement to approximately £13.8 billion, significantly reducing room for new spending commitments.[2]

At the same time, public sector borrowing remains higher than expected. Public sector borrowing in July 2026 was higher than this time last year, up £700 million.[3] Forecasters previously predicted a surplus of £500 million in July, meaning the government borrowed over £2 billion more than expected.[4]

Together, these pressures will likely restrict the Chancellor’s room for manoeuvre, as he targets measures aimed at easing the cost of living for households, with little room to increase borrowing.

A government focused on the regions

Economic pressures are not the only factor shaping the Budget.

Since becoming Prime Minister, Andy Burnham has made regional investment and devolution central themes of his administration. One of his first acts in office was the creation of No10 North in Manchester, aimed at ensuring communities outside Westminster have a greater voice in government decision-making. [5], [6]

When announcing the date of the Autumn Budget, Healey reinforced this theme, stating that the government intends to move “money and power out of Westminster, and into every postcode in Britain.”[7] As a result, while tax changes are likely to dominate headlines, regional investment and devolution could have significant long term outcomes.

So where might the Chancellor look if he needs to raise revenue or reshape government spending?

Could Capital Gains Tax rise again?

Capital Gains Tax (CGT) is once again expected to feature prominently in discussions ahead of the Autumn Budget. Following previous reforms, CGT rates are already much higher than they were a few years ago.

One proposal that has attracted attention comes from Health Secretary Wes Streeting, who has argued that Capital Gains Tax rates should be brought more closely into line with Income Tax rates.[8] Were such a policy introduced, basic-rate taxpayers could see CGT rates rise from 18% to 20%, while higher-rate taxpayers could face rates closer to 40% rather than the current 24%.

In our view, a full equalisation of CGT with Income Tax appears unlikely. The Institute for Fiscal Studies has noted that the effects of higher CGT rates would depend on their design, warning that rate rises in isolation could create economic distortions while arguing that closer alignment with Income Tax may be appropriate as part of wider CGT reform.[9]

Based on current indicators, if any reforms do take place they are more likely to focus on targeted changes, such as reducing exemptions, restricting existing reliefs or increasing rates on specific asset classes.

Could stamp duty or property taxes change?

Before becoming Prime Minister, Burnham argued that the UK’s property tax system is outdated and expressed support for a land value tax, which would tax the value of the land itself rather than the buildings on top of it.

This has fuelled suggestions that the government could eventually replace council tax and Stamp Duty Land Tax with a new annual property tax. Over the summer, reports emerged that ministers were considering a levy based on property values, with higher rates applying to second homes. The proposals have also received backing from a group of Labour MPs and campaigners who argue the current system is unfair and no longer reflects modern property values.[10]

However, Burnham has since sought to cool expectations, stating that there are no immediate plans to abolish either council tax or stamp duty. As a result, we think large-scale reforms is unlikely to feature in this year’s Budget.[11]

Changes to the ‘mansion tax’

While we think a wholesale overhaul of property taxation appears unlikely in October, more targeted measures cannot be ruled out. One possibility could be changes to the high-value council tax surcharge, also referred to as the ‘mansion tax’, introduced in the 2025 Budget. Some commentators have suggested the threshold could be reduced from £2 million to £1.5 million. This would almost double the number of homes likely to be affected to 243,000 up from the current 127,000.[12]

Whether this is likely to happen is uncertain.[13]

Could a wealth tax be announced?

Similarly to last year, a wealth tax is another measure that continues to generate debate ahead of the Autumn Budget. Proposals have been floated for a 2% annual levy on net individual assets worth more than £10 million, with campaigners claiming it could raise around £24 billion a year for the Treasury.[14]

However, introducing a wealth tax would not be without challenges. Critics argue it could discourage investment, encourage some wealthy individuals to leave the UK, and prove difficult to administer. International experience also raises questions about its effectiveness, with several countries having abandoned wealth taxes after finding they failed to generate the expected revenues.[15] Additionally, recent comments from the Prime Minister suggest a wealth tax may not be high on the government’s agenda. In an interview with the Financial Times, Burnham was adamant he wasn’t planning on taxing the wealthy out of Britain and recognised the importance of wealth creation.[16]

Taking these factors together, a broad wealth tax appears unlikely to feature in Chancellor John Healey’s first Budget.

Inheritance Tax rules for farmers and business owners

Earlier this year, the government introduced significant changes to Agricultural Property Relief (APR) and Business Property Relief (BPR). From 6 April 2026, 100% relief became capped at £2.5 million per person, with qualifying assets above this threshold receiving 50% relief. The reforms were originally proposed with a £1 million cap but were increased to £2.5 million following pressure from farming organisations and business groups.[17]

Despite the higher cap, many farming groups are urging the Prime Minister to honour his pre-election pledge to look again at APR and BPR reforms, arguing that they could still have a significant impact on family farms.[18] This has meant some speculate as to whether this policy will be revisited in the upcoming Budget.

However, given the pressure on the public finances, any further concessions would come at a cost – potentially one the Chancellor doesn’t want to pay. Even with a second review, farming families could continue to be affected by APR and BPR reforms and wealth transfer strategies may require a review.

Could a social care levy replace inheritance tax?

Prime Minister Andy Burnham has previously argued that the current Inheritance Tax system should eventually be replaced with a dedicated social care levy, applying a lower rate of tax across a broader group of taxpayers. While he has not recently repeated the proposal, he stopped short of ruling it out during the Makerfield by-election campaign.[19]

Recent proposals from the Institute for Public Policy Research (IPPR) have suggested introducing free personal social care, covering support with daily activities such as washing, dressing and eating. Under the proposals, the cost would be funded through a combination of a 1% Income Tax surcharge for people aged over 40 and contributions from housing wealth, with care costs potentially recovered from an individual’s estate after death.[14]

With that said, a major overhaul of either social care funding or IHT would be a huge undertaking and likely would require extensive consultation. Owing to this, we think any immediate changes in the Autumn Budget appear unlikely. However, with pressure on health and social care services continuing to grow and Burnham’s commitment to improving it, the Budget could provide clues about the government’s longer term thinking.

Will pensions be targeted again?

With major pension reforms announced in the 2024 Budget, it’s clear the government is willing to make significant changes when required. At present, there has been little to no indication that the Chancellor is planning any significant pension tax changes.

However, speculation has once again centred on measures such as pension tax relief, reducing the tax-free lump sum and, longer term, the state pension triple lock. Similar rumours emerged ahead of last year’s Budget, prompting some savers to bring forward withdrawal decisions. FCA data showed that total pension withdrawals in 2024/25 were almost 36% higher than in the previous year. Commentators suggested that uncertainty surrounding potential pension changes may have contributed to the increase. [20], [21] As always, no decisions should be made based on rumour and speculation.

Income tax and National Insurance

As part of its fiscal rules, the government has indicated it does not intend to increase the main rates of Income Tax, VAT or National Insurance. While we believe this makes a rise in headline Income Tax rates less likely, changes to allowances, thresholds and other aspects of the tax system remain possible.

However, Prime Minister Andy Burnham has previously suggested increasing the personal allowance, which has been frozen for several years.[22]Although even a £500 increase is estimated to cost the Treasury around £5 billion a year, making it difficult to deliver given current pressure on the public finances.[23]

There has also been discussion around targeted tax breaks for younger workers entering employment for the first time, such as temporary reductions in Income Tax or National Insurance.[24] While such measures could support employment and economic growth, they currently remain speculative.

Devolution

While tax changes tend to dominate Budget headlines, devolution could be one of the more defining themes of Chancellor John Healey’s first Autumn Budget.

Prime Minister Andy Burnham has pledged to move more power away from Westminster, with reports suggesting English mayors could gain greater control over areas such as transport, housing, skills and local investment.[25]

While the impact of these reforms would likely vary across regions, greater local control could influence how transport networks, housing projects, skills programmes and infrastructure investments are funded and delivered in the years ahead.

How to prepare for the Autumn Budget

While rising borrowing costs, pressure on the public finances and Labour’s political priorities may offer clues about what could be announced, the reality is that nobody outside government knows exactly what Chancellor John Healey will reveal on 28 October.

The temptation to act on speculation can be strong. However, making significant financial decisions before official announcements are made can carry unnecessary risks. If you’re concerned about how potential changes could affect you, consider speaking with a financial adviser who can provide tailored guidance based on your objectives and financial situation.