2025 Budget – a question of strategy or tactics?

This article first appeared in Professional Paraplanner in November 2025.

As ever, the lead up to the Budget is rife with speculation.

Commentators are trying to read the 'pitch-rolling' from Government but largely based upon what is not being confirmed or denied, as opposed to what is. It was ever thus.

Trying to categorise the options is difficult, but you could perhaps lay them all on a spectrum from a strategic rethink of our tax system and how it operates, to a more tried and tested series of tactical, short-term revenue raising tax rises.

Everyone seems to agree that the Chancellor has no choice but to take some action to shore up the nation’s finances, and certainly that is the narrative from Government, but there is disagreement on what approach will, or should, be taken to achieve this.

Wholesale changes could involve breaking manifesto pledges but, importantly, not abandoning self-imposed fiscal rules.

The most recent example is the speculation that income tax rates could be increased, perhaps by a penny or two, with a commensurate reduction in National Insurance. This could raise additional revenue but generally protects those on the lowest incomes.

Such a move could even be couched in a longer-term plan to remove National Insurance or, more accurately, merge it with income tax to simplify the system.

Equally, there are calls for the restructuring of property taxation, removing or reducing the negative impacts of stamp duty with a more stable form of annual taxation.

Some also still talk of the relative merits of equalising taxation of earned income and income that is taxed as capital gains.

And then there is the option of rethinking incentives within the system, such as the interaction of fuel duty and the exemptions for electric vehicles, or the relative merits of ‘sin taxes’ in areas such as gambling, alcohol and tobacco.

Whatever the Chancellor chooses to do from that list, if any of it, it would constitute a more strategic rethink of our tax system, rather than just tinkering.

But each of these approaches would inevitably create winners and losers and so would likely involve careful planning and public consultation, at least on the detail. That would take time to work through and may not provide the short-term payback required, alongside the additional political hurdles of protracted, public debates.

As with taking a strategic approach, even more tactical changes should come with careful planning. Many of the measures that have been floated in the press as possibilities for this Budget come with drawbacks and, as with more strategic changes, can create winners and losers. 

To take an example, one which is being widely discussed among advice firms and their clients in recent weeks, there are suggestions of a further restriction to the tax-free cash entitlement for pensions.

It's worth considering how the Government may consider such a change. Allow me to speculate.

First of all, there is the question of political risk. Tax-free cash is one of the most popular and best understood features of pensions, and those people who have amassed significant savings over a lifetime will have plans for this money, such as paying off a mortgage, helping their children or grandchildren onto the housing ladder, or simply having the holiday of a lifetime as they enter retirement. Scuppering such plans is unlikely to be warmly welcomed.

Second, there is the question of complexity. It sounds simple, reducing the amount from its current limit to something lower, but similar reductions to allowances in the past have usually been accompanied by a complex set of protections for people with existing entitlements. Protections which last for years, possibly decades.

Third, there is the fundamental question of how much revenue it raises, and over what timeframe. Assuming there are some protections in place, and that few people would simply withdraw above any new limit and pay extraordinary amounts of tax, this doesn’t look like it would amount to much, at least in the short term.  

Add to this that other political parties may vow to reinstate the current allowance, should they gain power, with some people able to wait a little longer before exercising the option.

What might look like a prize of single digit £billions for making such a change, may quickly be reduced to something more likely measured in £millions.

Unpopular, complex, and with minimal return: it doesn’t look like an obvious choice.

A long list of small changes could be more effective in providing the short-term revenue needed to make up the deficit but runs the risk of upsetting specific cohorts of the voting population and is less likely to address some of the structural problems in our tax system.

There are no easy options here. On that, I think we all agree.