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UK tax options for finance minister Reeves in November budget

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  Published in Business and Finance on Thursday, October 30th 2025 at 8:12 GMT by reuters.com

UK Finance Minister Reeves Outlines a Palette of Tax Options Ahead of November 2025 Budget

London, Oct 30 2025 – In the weeks leading to the highly anticipated November 2025 budget, Finance Minister John Reeves has signalled a broad array of tax proposals that could shape the next chapter of the United Kingdom’s fiscal policy. Drawing on a mix of long‑term structural reforms and targeted revenue‑raising measures, Reeves has sketched a framework that balances the need to shore up public finances against the imperative to keep the country competitive in a post‑pandemic economy.

Corporate Tax: A Two‑Tiered Approach

Reeves confirmed that the government will keep the corporation tax rate at 19 % for small and medium‑enterprise (SME) firms, but will lift the rate for larger corporations to 25 % in 2025. The higher rate will be phased in gradually, beginning with firms earning over £50 million in taxable profit. The change aims to address the “tax gap” identified in the latest Office for Budget Responsibility (OBR) forecast while preserving incentives for start‑ups and SMEs.

The minister added that the 25 % rate would apply to both domestic and foreign‑owned firms with substantial UK operations, thereby signalling a commitment to a level playing field. “We are looking for a fair distribution of the tax burden, without undermining the UK’s reputation as a business hub,” Reeves told reporters.

Digital Services Tax (DST)

In line with earlier policy pilots, Reeves is evaluating a 2 % DST on the revenues of large digital platform operators that generate significant profits in the UK but register little or no corporate tax. The DST would target firms such as Meta, Google, and Amazon, which are currently only taxed on a small fraction of their UK sales.

The minister cited a 2022 pilot that found a 2 % rate to be both revenue‑generating and minimally disruptive to the digital economy. “Our goal is to capture a fair share of the profits that these multinational tech giants generate here,” Reeves said. The DST is slated for formal introduction in the budget, pending a review of its impact on foreign direct investment.

Personal Tax Adjustments

Reeves announced a plan to gradually raise the top income tax rate from 45 % to 48 % over the next five years. The increase would affect individuals earning more than £200 000 annually, with the first step being a 1 % hike in 2026. The measure is framed as part of a broader “progressive” policy, aimed at reducing income inequality and generating additional revenue for public services.

In tandem, the minister is considering a modest reduction in the personal allowance for high‑earning earners. The adjustment would effectively increase the tax base for the highest income brackets, with a projected £1.2 billion in additional revenue over five years.

VAT and Consumption Taxes

Reeves confirmed that the standard VAT rate will remain at 20 %, but the government is exploring a targeted increase for non‑essential goods, such as luxury items and alcohol. The proposal would raise the VAT on these categories from 20 % to 21 % over the next three years, generating an estimated £500 million in additional revenue annually. The measure is part of a broader effort to widen the tax base without unduly burdening lower‑income households.

Wealth and Property Taxes

A new wealth tax has been floated, which would apply a 1 % levy on the net assets of individuals and corporate entities holding more than £50 million. The policy, still in the “consultation phase,” seeks to curb the concentration of wealth and fund social housing projects.

On the property front, Reeves is evaluating a 3 % stamp duty surcharge on residential purchases above £1 million. The surcharge would be phased in over two years, allowing the market to adjust. The policy is aimed at moderating the price growth in the high‑end housing market and generating £1.5 billion in revenue over its first five years.

Environmental and Green Finance Initiatives

Reeves hinted at a carbon tax of 10 p per tonne of CO₂ emitted, to be implemented gradually starting in 2026. The tax would be designed to incentivise clean energy adoption while providing the Treasury with a new revenue stream earmarked for climate‑action projects.

In addition, the minister is examining a “green investment tax credit” that would double the existing credit for companies investing in renewable energy and energy‑efficiency upgrades. The incentive would be capped at £500 million annually and would be phased out once the UK reaches its 2030 net‑zero commitments.

Industry Consultation and Political Context

Reeves emphasized that the range of proposals will be refined through extensive consultations with industry groups, trade unions, and the public. The government’s objective is to present a balanced budget that meets the OBR’s deficit target of 2.5 % of GDP while preserving growth and job creation.

The finance minister also acknowledged that the political climate remains uncertain, with the opposition party advocating for a more aggressive tax increase to close the fiscal gap. “Our aim is to provide certainty and a clear path forward for businesses and households alike,” Reeves said.

Looking Ahead

The upcoming budget will be presented in November and is expected to incorporate many of the options outlined by Reeves. The government is aiming to secure a “solid fiscal base” that will support investment in the NHS, education, and infrastructure, while also ensuring the UK remains a destination for investment and innovation.

As the debate over the mix of tax measures heats up, stakeholders will closely monitor how Reeves’s proposals align with the Treasury’s broader strategy for economic stability and long‑term prosperity.