21 November 2025
Income tax and National Insurance
HMRC’s latest tax receipts offer a stark reminder of how much of the heavy lifting in the tax system is now being done quietly and without ministers having to announce a headline rise in taxes. This is the final snapshot of public finances before the Chancellor delivers the budget next week.
PAYE Income Tax and NICs receipts for April 2025 to October 2025 were £272.6bn, which is £28.1bn higher than the same period last year. This rise once again reflects the combined effects of frozen thresholds and strong nominal earnings feeding through the tax system.
The main rumour sparked by Rachel Reeves’ unusual pre-Budget speech was that the Government might raise income tax, with some later speculation that thresholds could even be lowered. While these ideas now seem unlikely, they would have been hugely contentious and caused receipts to skyrocket in the new tax year had they been implemented.
Instead, the Chancellor appears to be opting for a smorgasbord of smaller, more targeted changes. Even without changes to the headline rates, workers are being pulled into higher-rate tax bands simply because thresholds have not kept pace with inflation. The freeze alone is generating a sizeable uplift to the tax take and one the Chancellor may choose to extend until 2030.
Capital Gains Tax
CGT receipts for the latest month were £230m. Just four years ago, the annual exempt amount stood at £12,300 compared to today’s £3,000, dragging many more people into paying the tax if they realise gains. To add fuel to the fire, from 30 October 2024 the main rates of CGT on assets other than residential property and carried interest swung from 10% and 20% to 18% and 24% for basic and higher rate taxpayers respectively. Instinctively, these changes should have boosted CGT receipts, but today’s figures show the tax take has plummeted by nearly £1bn (£926m).
This kind of drop underlines why a wealth tax is unlikely to be unveiled next week: more punitive measures can simply change behaviours rather than rake in more revenue. People sit on their hands rather than make disposals and create liabilities. Therefore, although some anticipate that the Chancellor may consider increasing CGT rates further, today’s figures make that decision less likely.
The Government has been clear that encouraging investment and wider participation in capital markets is a priority, and higher CGT would risk discouraging precisely that. With receipts dwindling, there may be little appetite to go further and compound the issue.
Inheritance tax
IHT receipts rose to £5.2 bn, which is £0.2 bn higher than the same period last year, as more people who may not feel hugely wealthy get snagged by the tax for having lived through a decade of frozen thresholds and rising house prices. This upward drift is only set to accelerate once pensions become liable to IHT from 2027, which will turbocharge future receipts and draw significantly more households into scope.
Against this backdrop, rumours of a lifetime gifting cap take on new weight. Such a change would represent a major structural shift and could introduce significant complexity into intergenerational financial planning. Strategies to mitigate any reforms announced next week will emerge once the details are known, but for those concerned about a future bill, making use of the £3,000 annual gift allowance remains a simple and effective way to reduce the value of an estate on death.
