With the date for the Autumn Budget now set at 26 November 2025, there is mounting speculation about what tax changes the Chancellor will announce.
We already know that there is pressure on the Chancellor from the Government’s fiscal rules. The manifesto pledge not to raise taxes on working people in theory rules out increases to Income Tax, National Insurance or VAT. So what are the Rachel Reeves’ options and what would they mean for brokers?
Freeze thresholds for longer
Income tax thresholds are currently frozen until 2027/28. Extending this for a further period of time, perhaps until the end of this parliament, would raise additional tax revenue for the Government while also not breaking their manifesto promise of not increasing tax rates.
These changes would impact employees and business owners alike, bringing more people into tax at higher rates.
Pension tax relief
We already know that residual pension funds will become liable to Inheritance Tax (IHT) from 6 April 2027. However, there are further changes that the Chancellor is thought to be considering:
- Ending higher and additional rate tax relief for pension contributions meaning that individuals will only be entitled to 20% basic rate tax relief.
- Scrapping or further limiting the 25% tax-free lump sum. Currently individuals can withdraw 25% of their pension without paying income tax up to a cap of £268,275.
Changes to pension tax relief would be a blow to employees and might deter people from saving for retirement, something that the Government has already acknowledged as being an issue.
Salary sacrifice arrangements
Linked to pension tax relief changes are salary sacrifice arrangements. Typically, an employee foregoes an amount of their salary in exchange for pension contributions. This has the benefit of Income Tax relief but also saves on National Insurance Contributions for both the employee and the employer (something that has become more attractive with the increase to employer’s National Insurance announced at the previous Budget).
Options to change these rules include:
- Capping the amount an individual can sacrifice each year
- Abolishing the National Insurance savings.
Both of these changes would be felt by employees and employers, with the largest impact being felt by those brokers with a significant number of employees making salary sacrifice pension contributions.
Further, if salary sacrifice arrangements were to be changed for pension contributions, it seems likely that similar arrangements that apply to benefits such as electric vehicles, childcare vouchers and cycle-to-work schemes may also be impacted.
Capital Gains Tax (CGT)
CGT rates were previously increased in 2024 to 18% and 24%; they could be increased further.
Although aligning CGT rates with Income Tax rates could have a detrimental effect, causing business owners to delay sales, increases in rates have been shown to increase tax revenues in the year before introduction with people wanting to secure a sale at the current rate.
This was something we saw last with a significant increase in sale activity within the market in the run up to the Budget. Whether a further increase this year would have the same effect remains to be seen.
Inheritance Tax
We know that significant changes were made to the IHT rules last year, some of which have still to take effect. Further changes that the Government are thought to be considering are in respect of gifts.
Currently if someone makes a gift and then survives for at least seven years from the date of the gift, the entire amount is exempt from IHT. The amount of relief tapers where a gift is made and the donor survives more than three years but less than seven. The Chancellor could:
- Introduce an overall cap on the value of gifts made within a donor’s lifetime.
- Adjust the taper period for gifts, with the 7 year point at which gifts are exempt being extended to 10 years.
Family-owned brokers have already seen a significant change in the way they plan for succession. With Business Property Relief now only applying to the first £1m of qualifying shares passed on, further changes to the gift rules could see more and more people coming within the charge to IHT when taking over the business.
National Insurance on partnerships
Currently partners pay class 4 National Insurance on their profits from the partnership as self-employed. However, because of this their profits are not subject to employer’s NIC.
While most brokers do not operate through partnerships, if this were to change such that employer’s NIC did apply to partnership profits, this would significantly impact those that do.
Conclusion
As well as the above it is thought that there are further changes being considered, some of which include reforms to property taxes, rental income and indirect taxes.
It remains to be seen what changes are announced on 26 November, however it seems likely that whatever these changes are they will impact the tax position for the insurance broking market.
If you would like to discuss the impact of these changes or any other tax related issues, please contact Tom Golding.
