Pensioners and middle-income households could experience increased financial pressure under Prime Minister Andy Burnham’s administration, according to financial experts. There are concerns that tax rises may target areas such as savings, capital gains, and investments.
Labour has consistently pledged not to increase income tax, National Insurance, or VAT. However, other fiscal measures could be introduced to strengthen the Treasury’s revenues. Michele Tieghi, a financial expert from the investment guidance platform PsyFi Money, indicated that changes to tax policy are a genuine possibility. He commented, “It’s definitely plausible that tax rises could be announced in the 2026 Autumn Budget in October, with some having a higher probability than others.”
To boost revenue without breaching these key pledges, Labour might rely on inflation and wage growth to raise tax bills indirectly. Mr Tieghi explained, “Freezing thresholds, personal allowances, and reducing allowances for higher earners will allow fiscal drag to become a major source of extra revenue.”
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Tax increases are already anticipated in the near future. Starting in April 2027, the tax rate on taxable interest earnings will rise by two percentage points across all tax bands. Newly appointed Chancellor John Healey may also consider adjustments to other levies on savings.
Mr Tieghi added, “There’s been talk about taxing savings. However, this would likely be unpopular and not Labour’s top choice. In theory, they could reduce the personal savings allowance, lower starting rates for savings, and increase taxation on investment income, which would disproportionately affect pensioners, middle-income families, and cautious savers.”
Currently, the personal savings allowance allows individuals to earn a certain amount of interest tax-free from their savings. The investment expert emphasised two taxes that the Government is more likely to increase: capital gains tax and inheritance tax. “Changes to these taxes remain a distinct possibility and have long been discussed as practical methods for raising revenue,” he noted.
Potential capital gains tax reforms could include reducing exemptions, raising rates, restricting Business Asset Disposal Relief, and modifying reliefs for entrepreneurs.
A significant change concerning inheritance tax is scheduled for 2027. Unused pension funds will become liable to the 40 per cent charge, although many estates currently avoid paying this tax altogether.
At present, an individual can pass on up to £325,000 tax-free, plus an additional £175,000 exemption when transferring a main residence to a direct descendant. Moreover, unused tax-free allowances can be transferred to a spouse or civil partner, potentially allowing a combined allowance of up to £1 million per estate.
Highlighting the possibility of further inheritance tax adjustments, Mr Tieghi said, “Andy Burnham’s Government could tighten trust rules, modify gifting exemptions, reduce reliefs, and increase compliance measures.”
Responding to such speculation, a Treasury spokesperson stated, “The Chancellor is fully focused on his priorities, including boosting business, helping with the cost of living, and supporting people in every postcode. As has always been the case, the Chancellor will announce decisions at fiscal events and does not comment routinely on rumours, speculation, or proposals.”