The Chancellor will deliver the Autumn Budget on 26 November 2025. In a pre-Budget statement from Downing Street, Rachel Reeves talked about a Budget built on “fairness and opportunity” and declined to rule out tax increases.
That messaging tracks weeks of reporting on a tougher fiscal outlook and the likelihood of additional revenue-raising measures. Financial coverage has highlighted a prospective downgrade to productivity by the Office for Budget Responsibility, which would punch a sizeable hole in the forecasts and make tax rises harder to avoid.
When not if.
Let’s be honest. The question is when, not if, taxes will go up, and then how they should go up.
The UK, like other advanced economies, faces slow burn but very expensive pressures: the energy transition; an ageing population; chronic housing and infrastructure needs.
We can’t keep kicking the can down the road. Acting sooner spreads the adjustment over more years and avoids piling up debt interest that eats into future budgets.
Thinking we can navigate the next two decades without higher taxes or lower spending elsewhere defies the fiscal maths.
We can’t keep kicking the can down the road. Acting sooner spreads the adjustment over more years and avoids piling up debt interest that eats into future budgets.
Broad bases beat narrow targets
If ministers need to raise meaningful sums, they have to adjust taxes that most people actually pay; they need a broad tax base.
The scale looks roughly like this:
- Income tax (basic rate): +1p raises about £6.9bn per year.
- Income tax (higher rate): +1p raises about £1.6bn.
- Income tax (additional rate): +1p raises about £145m.
- VAT (standard rate): +1 percentage point raises about £8.8bn.
- VAT (reduced rate): +1 percentage point raises about £0.49bn.
These figures come from the same government-style “ready reckoner” logic often used inside the system. They aren’t precise forecasts; behaviour and the economic cycle matter.
They do, however, make one thing crystal clear: a 1p on the basic rate yields more than four times the higher-rate change and roughly forty-seven times the additional-rate change.
If you want serious revenue, go broad.
If ministers need to raise meaningful sums, they have to adjust taxes that most people actually pay; they need a broad tax base.
What a sensible package could look like
1) Simplify income tax and nudge the basic rate.
The current income-tax schedule is frankly messy. A cleaner structure, with the basic rate at 22% (its level in 2007), would raise on the order of £14bn.
Reducing some of the adjustments to personal tax allowance would remove a feature whereby the tax rate on the next pound earned is as high as 60% even though the highest tax rate is supposed to 45%.
Even if getting to this is too big a step in one go, announce it as part of a medium-term plan so households and firms can plan with fewer surprises.
2) Make VAT fairer and clearer.
Exemptions and reduced rates are a patchwork that seldom help the people we intend to help.
Moving toward a single VAT rate (potentially below 20%) with direct cash support for low-income households can raise revenue and make the system more transparent.
Put the redistribution outside VAT, rather than hiding it inside the rate structure.
3) Be straight about limits.
Even a 2p rise in the basic rate plus VAT reform won’t balance the books by itself. There will still need to be clear choices on spending priorities.
The one option we should avoid is another decade of under-investment in public services and infrastructure, since that only stores up bigger economic costs later.
Why now, and how to carry the public
Markets and voters alike value clarity.
The Chancellor has begun to prepare the ground for difficult decisions, and reputable UK outlets report active consideration of broad-based measures because the gap is measured in tens of billions, not small change.
A credible package that raises revenue and tidies up the system will be easier to explain and defend.
Communication matters. My own work emphasises that plain-English, transparent policy explanations improve understanding and trust.
If the Budget sets out why more revenue is needed, who will pay, and how the most vulnerable will be protected, it stands a much better chance of bringing the country with it. And the budget doesn’t have to do it all immediately.
A credible strategy should not just focus on the changes in this year’s budget but should set out where we are going and how we will get there over the coming years.
Article originally published: Expert Comment: The UK’s Autumn budget. Tax rises are coming; let’s design them well | University of Oxford
