Chancellor Rachel Reeves took the unusual step of giving a pre-Budget speech three weeks ahead of the actual Autumn Budget, scheduled for 26 November.
Speaking from Downing Street, she set out the ‘principles and choices’ behind her approach - hinting that the government faces some careful financial decisions.
Signalling tough choices
Rachel Reeves said the government must “deal with the world as it is, not as we might wish it to be”. She highlighted a range of challenges shaping her approach, including:
high government borrowing costs;
global tariffs and supply chain pressures;
persistently high inflation and everyday costs; and
the need to strengthen public services such as the NHS.
National debt now stands at around £2.6 trillion - about 94% of national income. Roughly £1 in every £10 of tax paid by the UK taxpayer, now goes on debt interest payments alone.
She linked these pressures to weaker-than-expected productivity and said the government’s task was to rebuild “on difficult ground.”
Tax speculation grows
While the Chancellor didn’t confirm any measures, she refused to rule out tax rises. She said “each of us must do our bit” to restore the nation’s finances.
Some political analysts have suggested she could raise Income Tax - which would break Labour’s election manifesto commitment not to increase Income Tax, VAT or National Insurance (NI).
Maike Currie, VP Personal Finance at PensionBee, says:: “Rachel Reeves is preparing the ground for tough fiscal choices. By signalling her intent ahead of time, she’s setting expectations for what could be one of the most consequential Budgets in recent memory.”
The rumoured increase of 2p on every £1 or 2% to Income Tax would impact everyone from the working population, including landlords and pensioners. There are also expectations that the government could rake in more tax by stealth - freezing Income Tax thresholds and allowances for longer. However, the government hasn’t confirmed any such plans.
How markets reacted
Markets responded in different ways to Rachel Reeve’s speech.
Bond markets steadied
UK government bond (gilt) yields fell slightly - with 10-year yields around 4.4% and 30-year yields near 5.15%. Lower yields suggest investors were reassured by Reeves’ renewed commitment to her fiscal rules, which aim to keep borrowing under control.
Sterling slipped
The pound fell about 0.6% to below $1.31 against the US dollar - its lowest level since April 2025. The move reflected expectations that higher taxes could weigh on household spending and growth.
The FTSE 100 (an index of the 100 largest UK companies) fell by around 0.6%, in line with wider weakness across European markets. Mining and energy shares were among the biggest fallers.
Bond yields represent the interest rate the government pays to borrow money. When they fall, it usually signals greater confidence in the UK’s financial stability - and it can reduce the cost of servicing national debt.
Rachel Reeves’ repeated reference to the 2022 “mini-Budget“ under Liz Truss was a reminder of how quickly confidence can evaporate when markets lose faith in fiscal discipline.
A message of realism and reform
The Chancellor said it was time to be honest with the public about the scale of the challenge. Her message centred on three priorities:
Stability - maintaining market confidence.
Investment - supporting growth and productivity.
Reform - addressing long-term issues in welfare and public services.
She described productivity as a “problem, not a puzzle”, and called for policies that protect those unable to work while empowering those who can.
What to expect from the Autumn Budget 2025
With the Autumn Budget just weeks away, attention now turns to 26 November - when Rachel Reeves is expected to outline specific measures to address the UK’s public finance gap.
While no policies have been confirmed, current speculation focuses on possible changes to:
Income Tax - the basic rate could rise 2% or by 1–2p on every £1. The current threshold freeze might be extended beyond April 2028.
Capital Gains Tax (CGT) - higher rates or changes to the tax-free allowance when selling valuable assets such as property or shares.
Inheritance Tax (IHT) - updates to lifetime gift rules or continued freezes on tax-free allowances.
Pensions - the possible introduction of a single flat rate of tax relief for all taxpayers or changes to the 25% tax-free withdrawal lump sum.
ISAs - potential adjustments to the annual Cash ISA allowance and/ or the introduction of a special allowance to encourage investment into UK equities.
The bottom line
Nothing’s confirmed until Rachel Reeves delivers the Autumn Budget at the end of the month. Between now and then, there’ll be plenty of headlines and speculation - but remember that most details are still to come.
Budget announcements often spark discussion about tax and spending, which can feel uncertain for savers, investors and business owners. But their impact usually unfolds over time rather than overnight.
We’ll be covering the Autumn Budget once it’s announced, explaining what the changes mean for pension savers in clear, simple terms.
Risk warning
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.
