Chancellor Rachel Reeves is considering sweeping tax changes ahead of the Autumn Budget on November 26, with pension taxation, income tax thresholds, and motoring rules all potentially facing adjustments. The Treasury is seeking new revenue sources to address a £50 billion financial shortfall.
Financial experts have identified four key areas where pension tax relief could be reduced. Sean McCann, a chartered financial planner at NFU Mutual, noted that current pension benefits represent a «large expense to the Treasury». The Chancellor may cut the annual pension contribution allowance from £60,000 to £25,000, reduce the tax-free lump sum cap from £268,275 to £150,000, scrap the income tax exemption on pension death benefits for those dying before age 75, and potentially introduce a 5% National Insurance levy on employer pension contributions.
Income Tax Freeze Extension
Reeves is also reportedly considering extending the freeze on income tax thresholds beyond 2028, which could generate an additional £10 billion annually. The policy, originally introduced by the Conservatives, means tax thresholds do not rise with inflation. A worker earning £42,000 could face an additional £250 annually if wages rise 5% and inflation is 2%. Oxford Economics described the extension as «a near certainty», while a former Treasury official said the Chancellor would «without a doubt» extend the freeze.
Expert Concerns
Tom Selby, director of public policy at AJ Bell, emphasized the need for stability: «Pension savers across the UK have sent a clear message to the Chancellor. We need a firm commitment to a Pension Tax Lock to allow people to plan ahead with certainty.» He added: «Anyone sacrificing take-home pay today to save for the future deserves a concrete promise that they can access their pension on the same terms as the generation before them.»
McCann warned that taxing all pension death benefits, combined with planned inheritance tax changes from April 2027, would be «a double blow for some bereaved families». He noted that reducing the tax-free lump sum cap would likely be «viewed as a tax-raising measure focused on wealthier investors».
Additional motoring changes are expected, including the Fuel Finder scheme requiring major retailers to update fuel prices within 30 minutes and the rollout of digital driving licences before the end of 2025. The fuel duty freeze remains in place until March 2026, though early scrapping could increase costs for drivers.
Note: This article was created with Artificial Intelligence (AI).
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