Recent figures from the Office of National Statistics (ONS) show a significant jump in UK government borrowing, which is fuelling widespread debate about whether we could soon face new or increased taxes. For both business owners and individuals, understanding the backdrop to these headlines is key to planning effectively.

The Numbers: Why Borrowing is Making Headlines

In June 2025, UK government borrowing reached £20.7billion. This is £6.6billion higher than the same month in 2024, and one of the highest on record outside of the pandemic period. Over the first quarter of this financial year, borrowing hit £57.8billion, roughly £7.5billion higher than last year’s figure for the same period, and well above the projections made by the Office for Budget Responsibility (OBR). 

The surge has been attributed to several pressures:

• Rising debt interest payments: Interest on government debt soared to £16.4billion in June, nearly double what was paid a year earlier, largely due to inflation’s impact on index-linked bonds.
• Public service spending and welfare: Government decisions to abandon planned cuts to welfare benefits have kept commitments high, narrowing the Chancellor’s fiscal room for manoeuvre. 

Fiscal Rules versus ‘Headroom’

Chancellor Rachel Reeves has, to date, remained firm on her self-imposed fiscal rules:

• Not borrowing for day-to-day spending.
• Getting national debt falling as a share of national income by 2029–30. 

Independent analysts suggest that, unless economic growth accelerates unexpectedly or spending is trimmed further, Reeves may face a shortfall of £10–25billion that needs to be bridged to stick to these rules. With many public services already under strain, most experts agree that further spending cuts are unlikely, making tax rises a strong possibility in the upcoming Autumn Budget. 

What Tax Changes Might We See?

As always, there is a lot of speculation around the exact measures that could be taken, but several options are emerging as favourites among commentators and think tanks:

1. Freezing or Extending Income Tax Thresholds:
While there were early signals that the freeze on income tax thresholds might end in 2028, the Chancellor could choose to extend the freeze beyond that date. Freezing thresholds means more people are dragged into higher tax bands as wages rise, boosting government revenues without incurring obvious rate rise headlines.

2. Capital Gains Tax (CGT) Increases:
The Autumn Budget is likely to include changes to CGT rates and reliefs. The lower rate has already increased from 10% to 18%, and upper rates are also rising. Business Asset Disposal Relief and Investors’ Relief rates are set for further increases in April 2026, with lifetime relief limits being reduced. 

3. Inheritance Tax (IHT) Reforms:
There is growing discussion about tightening IHT rules, including a proposal to apply IHT to private pension pots and reduce allowances for farming estates. From April 2027, private pension wealth is expected to be subject to inheritance tax at 40%. 

4. Pensions, ISAs and Allowance Adjustments:
High earners may face cuts to pension tax relief and reduced ISA allowances. These are under active review according to various consultations now underway. 

5. Business and Other Taxes:
Employer National Insurance rates have been increased, and sector-specific reliefs may come under scrutiny. Meanwhile, stamp duty land tax (SDLT) surcharges on additional properties and corporate property purchases have been increased. 

Why now? 

The government says it wants to restore stability after years of economic turbulence, pandemic pressures, and policy reversals. Growth remains sluggish, and ongoing public service demands limit the options for cutting expenditure.

Borrowing to fund everyday spending is not sustainable, and with increasing borrowing costs, the Chancellor appears to have little choice but to consider raising taxes if fiscal discipline is to be maintained. 

What should you do?

With major tax changes likely, now is a good time to review your personal and business finances to understand how you could be affected in the months ahead, particularly around the areas shown above. As ever, we’ll keep a close eye on all announcements and keep you up to date as soon as we have anything tangible to tell you. We’ll keep the speculation to a minimum though, as there’s limited value in exploring all of the potential permutations!

If you have any questions about how any of the potential changes listed above might affect your circumstances, please get in touch; we’re here to help you as far as is possible with the details that we have so far.