2026 Budget Tax Rise Rumours and Capital Gains Tax Predictions

The 2026 Autumn Budget has a squeeze written all over it. Prime Minister Andy Burnham has promised not to raise Income Tax, VAT or National Insurance, while Chancellor John Healey still needs to find money for public services, devolution plans and a weak economy that is not delivering enough tax revenue on its own.

That is why the tax rumours are gathering pace.

If the main manifesto taxes are off limits, the Budget has to look elsewhere. Capital Gains Tax, pensions, property, allowances and reliefs are all being watched closely. Some ideas would raise money directly. Others would raise it quietly by freezing thresholds, tightening exemptions or changing how tax is calculated.

This is a prediction piece based on public rumours, political signals and the tax options most likely to be available to the Treasury. It is not financial advice.

The tax lock leaves only so many places to go

Burnham has repeated Labour’s 2024 manifesto pledge not to raise Income Tax, VAT or National Insurance contributions for “working people”. He has also said he will stick to Rachel Reeves’ fiscal rules and give households and businesses “new hope” and “breathing space”.

That sounds reassuring, but it narrows the Budget choices.

The Chancellor still has to deal with:

• Higher-than-expected borrowing, including pressure after August figures came in above expectations

• Sluggish growth, which weakens tax receipts

• Spending demands, especially around public services and devolution

• Labour’s promise of “growth in every postcode”, which may require upfront investment

• Fiscal rules, which limit how far the government can rely on borrowing

  
  

That combination points to one likely outcome: tax rises may come, but not through the three headline taxes Burnham has pledged to protect.

The political task is to raise revenue without looking as though the government has broken its central promise. That is why the Autumn Budget Predictions 2026 debate is focusing on taxes that sit outside the manifesto lock.

That quote matters because it does not rule out tax rises. It suggests any increases would be framed as limited, targeted and necessary.

Capital Gains Tax is the rumour to watch

The biggest rumour is a rise in Capital Gains Tax, often shortened to CGT.

CGT is charged when someone sells or disposes of an asset that has increased in value. It can apply to second homes, shares outside an ISA, business assets and some other investments. It does not usually apply to the sale of a main home.

Under current rules, the CGT basic rate is 18%, while higher and additional rate taxpayers pay 24%. The Telegraph has reported that the government is considering raising CGT as high as 45%, with one idea being to align it more closely with Income Tax.

That would be a major change.

Former Labour leader Lord Kinnock has also called for CGT to be raised, adding political cover for a move that would be popular with parts of the Labour Party. The argument is simple: income from work is often taxed more heavily than gains from assets, so the tax system should treat them more equally.

The counterargument is also strong. CGT is not like PAYE, where money comes in steadily every month. People can delay selling assets if the tax charge becomes too high. That could reduce transactions, slow investment sales and make receipts less predictable.

A sharp CGT rise could affect:

• Landlords selling buy-to-let properties

• Investors selling shares outside tax wrappers

• Business owners planning exits

• People with valuable second homes

• Estates and families planning asset transfers

  
  

The key question is whether Healey goes for full alignment with Income Tax or a smaller increase. A move to 45% would be bold and controversial. A more modest rise would still raise revenue, while reducing the risk of owners simply sitting on assets.

A personal allowance rise would be the political sweetener

One rumour links a CGT rise to an increase in the Income Tax personal allowance.

The reported idea is to raise the tax-free personal allowance from £12,570 to £15,570. That would allow people to earn more before paying Income Tax. For many workers, it would feel like a direct tax cut, especially after years of frozen thresholds.

This is where the politics gets interesting.

Raising CGT while increasing the personal allowance lets the government say it is shifting the tax burden away from earnings and towards wealth. It would also help Burnham argue that he is protecting “working people”, even if some taxes rise elsewhere.

The challenge is cost.

Increasing the personal allowance is expensive because it benefits a very large number of taxpayers. CGT raises far less than Income Tax, VAT or National Insurance. It is also more volatile. That means the numbers would need to be carefully balanced if one tax change is meant to fund the other.

There is also a distributional question. A higher personal allowance helps basic-rate taxpayers, but it can also benefit many higher earners unless the government restricts the gain. The Treasury could limit the benefit by changing thresholds elsewhere, but that would make the Budget more complicated.

Frozen thresholds could do a lot of quiet work

The government may not need to raise Income Tax rates to increase Income Tax receipts. It can keep thresholds frozen.

This is often called fiscal drag. As wages rise, more income is pulled into tax, and more people move into higher tax bands. The headline tax rate stays the same, but the tax take grows.

For a Chancellor, this has one obvious attraction: it raises money without announcing a rate rise.

For households, the effect is real. Pay rises can be partly swallowed by tax. Someone who feels no richer in day-to-day terms may still pay more because thresholds have not kept pace with earnings.

If Burnham wants to honour the manifesto promise in a narrow sense, continued threshold freezes may be one of the easiest routes. It would not be presented as an Income Tax rate rise, but it would still increase the overall tax burden.

That makes the personal allowance rumour more important. Raising the allowance would reverse some fiscal drag for lower and middle earners. Keeping other thresholds frozen could claw some of the cost back.

Other taxes could be tightened without breaking the pledge

CGT has attracted the most attention, but it is not the only option. The Treasury has several other levers that sit outside the headline promise on Income Tax, VAT and National Insurance.

Inheritance Tax is a natural Budget rumour because it affects wealth rather than wages. The government could change reliefs, tighten exemptions or adjust rules around gifting. That would avoid the main manifesto taxes, but it would still be politically sensitive.

Pensions are another tempting target. Pension tax relief costs the Exchequer a great deal, and higher earners benefit most in cash terms. Any change would need careful handling because pensions policy affects long-term saving behaviour. Sudden reforms can create confusion and may push some people to change retirement plans.

Dividend taxes could also rise, especially for company owners and investors who receive income outside an ISA or pension. This would not be an Income Tax rate rise in the traditional sense, but many taxpayers would still feel it as a higher tax charge on income from shares.

Businesses will look for breathing space

Burnham has promised businesses “breathing space”, which suggests the Budget may avoid a dramatic rise in headline business taxes. Yet companies may still face indirect pressure.

The Chancellor could raise revenue by reducing reliefs, changing allowances or delaying planned support. He could also target specific sectors if the government believes they can bear a higher burden.

For small companies, the main worry is not always one big tax rise. It is the pile-up of smaller changes:

• Higher employment costs

• Less generous allowances

• Tighter dividend rules

• Property tax costs

• Compliance changes

• Weaker consumer demand

  
  

If the Budget aims to support growth, Healey may need to pair any tax-raising measures with incentives for investment. That could mean targeted capital allowances, regional growth funds or measures linked to devolution. The risk is that the Budget becomes too complex, with one part taking money away while another offers support back.

The phrase “growth in every postcode” points towards regional policy. That could mean more fiscal power for local areas, new investment zones or targeted infrastructure funding. The hard part is paying for it without loosening the fiscal rules.

The most likely Budget package

A plausible 2026 Budget package would try to balance three messages.

The first message would be reassurance. Burnham would say the government has kept its promise not to raise Income Tax, VAT or National Insurance for working people.

The second would be fairness. Healey would argue that those with the broadest shoulders, especially people making large asset gains, should contribute more.

The third would be growth. The Budget would present tax changes as part of a plan to fund devolution, investment and long-term productivity.

On that basis, the most likely measures look like this:

1. A Capital Gains Tax rise

   
   

   The Budget may increase CGT rates, though full alignment with Income Tax would be the most aggressive version.

   
   

2. Some form of personal allowance support

   
   

   Raising the allowance to £15,570 would be expensive, but politically powerful. A smaller increase or targeted support may be easier to fund.

   
   

3. Frozen or adjusted thresholds elsewhere

   
   

   The government may use fiscal drag to raise revenue while avoiding headline rate rises.

   
   

4. Tighter wealth and investment tax rules

   
   

   Inheritance Tax reliefs, dividend taxation and pension relief could all face scrutiny.

   
   

5. Growth and devolution funding

   
   

   Any tax rises will likely be framed as funding regional growth, public services and economic stability.

   
   

The Budget may also contain smaller changes that receive less attention on the day but matter over time. These often include anti-avoidance measures, relief reviews and technical reforms.

What taxpayers should watch on 28 October

The headline rate changes will attract the most attention, but the details will matter more.

For CGT, watch the start date. If a rate rise takes effect immediately, people who were planning disposals will have little time to act. If it starts in the next tax year, there may be a rush to sell before the deadline.

For the personal allowance, watch whether the increase applies to all taxpayers or is paired with changes elsewhere. A higher allowance sounds simple, but the net effect depends on thresholds, tapering and benefit interactions.

For pensions, watch the wording. Sometimes the biggest changes are announced as reviews or consultations rather than immediate reforms.

For businesses, watch allowances and reliefs. A stable headline tax rate can still sit alongside a higher effective tax bill if reliefs become less generous.

And for households, watch the combined effect. A Budget can cut one tax, freeze another threshold and raise a third charge. The real question is not whether one measure sounds good or bad, but whether the overall package leaves people better or worse off.

The takeaway

The 2026 Budget is likely to be built around a political constraint: no rise in Income Tax, VAT or National Insurance. That does not mean no tax rises.

Capital Gains Tax is the clearest candidate for reform, especially if the government wants to fund a higher personal allowance and present the Budget as a shift from taxing work to taxing wealth. A rise to 45% would be dramatic, but even a smaller increase would mark a clear change in direction.

The Budget’s success will depend on whether Healey can raise money without damaging confidence. If the package feels fair, limited and pro-growth, Burnham may get the breathing space he has promised. If it feels like a disguised tax raid, the first Budget of his premiership could quickly become a test of trust.