Budget 2026: the tax rises people are most against

The past couple of Budgets have marched noisily towards us for months, accompanied by a cacophony of leaks, rumours and alarm bells. This one is sneaking up on us more stealthily. It’s one reason why the level of anxiety is slightly lower – with 63% of people concerned that possible tax rises in the Budget could affect them, down from 67% ahead of the previous Budget.

However, while we’re not being deafened by Budget speculation, more recently rumours have started to rumble, from a possible change to tax on holiday lets to calls from some quarters to increase capital gains tax and suggestions the threshold for the mansion tax might drop from £2 million to £1.5 million – doubling the number of people affected to 300,000.

It means people are still worried about what might be lurking in the shadows. The top five fears were of potential tax hikes, while the most popular move would be a tax cut. This reflects the fact that 41% of people want to see tax cuts in the Budget and only 23% of people want to see taxes rise.

However, not all tax rises are universally unpopular. In among the changes people are more supportive of were the introduction of a new wealth tax and cuts to inheritance tax breaks. This reflects the fact that most of the people who want to see tax rises in the Budget only want to see them rise for other people. Only 6% of people were in favour of tax rises for people like them.

What are the biggest Budget fears?

Fuel duty

Half of people said they didn’t want to see fuel duty rise. This is a particular worry at a time when the conflict in the Middle East has seen prices at the pumps spike, so any extra tax would be adding insult to injury. However, given any rise to fuel duty would be unpopular without being a significant boost to the Treasury coffers, it makes this move less likely from a political perspective.

Income taxes

There are also worries about potential taxes on incomes. Some 41% of people would be against raising income tax, with 39% of people saying they would be against the idea of keeping tax thresholds frozen beyond 2031 – when the current freeze is set to end. Meanwhile, 37% would be against raising employee National Insurance.

The good news is that Andy Burnham has made it clear he will stick to Labour’s manifesto pledges of not raising income tax or National Insurance. Further freezes in the thresholds would be unexpected, given that Burnham said freezing the personal allowance had been such an unpopular move on the doorsteps during his recent campaigning. However, the cost of ending the freeze earlier than 2031 would be so high that it would be incredibly difficult to do at this stage too.

Tax hikes and further freezes can’t be ruled out in the years to come, and there have been rumours that the tax rate could be up for discussion in the next parliament, but politically speaking it’s not going to be the chancellor’s first choice.

Inheritance tax

Some 34% of people don’t want to see inheritance tax gift allowances cut and a third of people (33%) would be against cutting inheritance tax breaks – like the fact your estate can be left tax free to a spouse or civil partner. This reflects how unpopular inheritance tax is, and how much people worry about its impact on those they leave behind.

However, the divisiveness of the subject is clear from the fact that 32% of people support cutting inheritance tax breaks and 24% would be in favour of cutting gifting allowances. For those who are nowhere near busting the inheritance tax nil rate bands, the fact that these tax breaks favour those with more assets may persuade them they’re a sensible target.

It would be a brave chancellor who changed the rules around inheritance tax again at this stage, after the backlash from previous changes. Burnham has made it clear that over the longer term he wants to see this tax replaced entirely, so he may not be tempted to tinker with it in the interim.

Tax-free cash on pensions

Another major concern is that the government could make changes to the maximum tax-free cash you can take from your pension, with 29% of people saying they would be against the change. This has been at the forefront of Budget fears for years and has prompted some people to rush to take tax-free cash well ahead of when it makes the most sense for their finances. Analysis of Financial Conduct Authority (FCA) data indicates an extra £10 billion was withdrawn from pensions ahead of the first Labour Budget in 2024 alone. It’s why AJ Bell has been calling for the chancellor to commit to pension tax stability ahead of the Budget, to avoid another multi-billion-pound increase in early withdrawals from retirement funds.

The fact that this commitment hasn’t been forthcoming shouldn’t persuade anyone to raid their pension in a hurry. It’s vital not to let Budget fears force you into any major financial steps that you wouldn’t otherwise be considering.

What are voters more hopeful for?

Personal allowance

The Budget change that would get the most support is a rise in the personal allowance, which 61% of people said they would get behind. This has been frozen since April 2021 and is set to remain so until 2031. A possible rise was something Andy Burnham mentioned during his campaign for the leadership, although he has since made it clear this was never a firm promise. The cost of such a move at a time when the government is trying to save money means it’s unlikely to be on the cards this time around.

Property taxes

Two of the changes people would like to see have already been ruled out in the immediate future – a change to council tax, which 38% of people would support, and a new property tax to replace stamp duty, which 27% are in favour of. Both are thought to be ambitions of the prime minister, but he has already said this will be a longer-term change rather than an overnight sensation.

Defence

One popular change that may well come to fruition is increasing defence spending (which 41% of people support). The fact that John Healey is a former defence secretary who previously resigned over a lack of funding for defence means this may well be a priority. Whether it rises immediately, or as much as had been hoped, remains to be seen, but it would be unexpected for some sort of commitment not to be forthcoming.

Wealth tax

A popular change identified by the survey was introducing a new wealth tax, as a percentage of total assets (which 44% of people support). This was the second most popular option, and only 23% of people said they would be against the idea. It’s likely to owe something to the fact that many people assume the wealth cut off will exclude them from this tax and will fall more heavily on those who can afford to pay it.

In reality, this kind of tax is fraught with difficulties, including for those who may live in expensive properties but have a lower income, so would struggle to pay the bills. It would also be expensive to implement, because it would involve calculating the value of people’s total assets. Plus, it risks not raising as much as initially expected, because people can structure their finances to ensure they pay less tax.

This is one reason why the wealth tax that tends to be floated alongside Budget speculation more often is capital gains tax. It has been the target of both rate hikes and allowance cuts in recent years, but it’s difficult to know whether more rate rises would end up raising any more cash, or whether people would just change their behaviour to get around the tax. Nonetheless, it’s clear that the environment isn’t likely to get more generous towards the treatment of wealth, so if you have assets outside ISAs and pensions, and the relevant available allowances, it’s well worth considering protecting them from tax.

Stamp duty on shares

Abolishing stamp duty on UK shares also made it to the top five most popular potential changes (favoured by 32% of people). It would be a boon for investors and was an idea the Starmer-Reeves administration had floated ahead of previous Budgets as part of efforts to encourage more people to invest. It may well come down to whether the chancellor thinks it will move the dial enough on investment to be worth the cost.

Balancing the books

While clearly tax cuts and more spending will always be popular, our survey also asked people to consider the bigger picture. Given the fact that the Budget is likely to need to raise money, we asked how people would like to see the chancellor do it.

Overall, 28% wanted the government to close the gap in the public finances with spending cuts, 21% wanted them to do it through taxes excluding income tax, 12% didn’t think any changes were needed, 11% wanted an increase in income taxes and 9% wanted more government borrowing to close the gap.

In reality, it’s likely to have to be a combination of spending cuts and rising taxes. More government borrowing is a tough ask at a time when bond yields are so high.