Chancellor Reeves signals tax hikes in Autumn Budget, blames Brexit cost

When Rachel Reeves, Chancellor of the Exchequer of the UK government took the stage at the Trades Union Congress (TUC) in Liverpool on 15 October 2025, she didn’t mince words: “There will be difficult decisions in the next Budget, and that will include some tax rises.” The speech, delivered at the ACC Liverpool convention centre, was timed to hit the headlines just weeks before the government’s Autumn Budget.

Why Brexit is stealing the spotlight

The Chancellor anchored her warning in a cascade of numbers supplied by the Office for Budget Responsibility (OBR). In its March 2025 Economic and Fiscal Outlook, the OBR estimated that Brexit has shaved roughly 4 percent off national income, translating into a £99.8 billion shortfall in tax receipts for the 2024‑25 fiscal year. That figure, the OBR says, is almost identical to the £100 billion hole that Reeves referenced in her speech.

“The cost of Brexit has taken a heavy toll on our public purse,” Reeves told an audience of about 1,200 union delegates. “If we don’t act now, the burden will fall on future generations.” She cited a recent study from the National Institute of Economic and Social Research (NIESR) showing that trade barriers cost exporters £8.7 billion a year and that 42 percent of firms report higher administrative expenses.

The crunch numbers: tax shortfalls and spending pressures

Data from HM Treasury painted an equally stark picture. In the second quarter of 2025, corporation tax receipts came in at £14.3 billion, far below the £36.4 billion that had been forecast – a £22.1 billion shortfall that the Treasury now has to plug.

The Institute for Fiscal Studies (IFS) warned that the government faces £79.5 billion of spending pressures over the next three years. Their modelling suggests the fiscal gap could be narrowed either by a 1.2 p increase on income tax across all bands or by cuts that would touch public services ranging from health to local government.

Meanwhile, the Resolution Foundation ran the numbers in a different direction: closing the Brexit‑induced deficit would require a 2.8‑point rise in VAT or a 3.1 p hike on income tax – both options that would be felt deeply by low‑and‑middle‑income households.

Reaction from the unions and business groups

Union leader Paul Novelli, General Secretary of the TUC expressed cautious support. “We understand the fiscal reality,” Novelli said, “but any tax increase must be paired with a clear plan to protect workers on low wages.” He pointed to the British Chambers of Commerce’s latest survey, which found that 68 percent of businesses have experienced customs delays exceeding 48 hours, costing the economy an estimated £7.2 billion in storage and demurrage fees.

On the other side of the aisle, the Confederation of British Industry (CBI) warned that “business investment remains 16.3 percent below the pre‑Brexit trend,” and that an additional £28.7 billion a year would be needed to get the economy back on track.

Even the Chartered Institute of Taxation weighed in, cautioning that a 1.5‑percentage‑point rise in National Insurance would raise £15.3 billion annually but would disproportionately affect lower‑income workers.

What the Autumn Budget 2025 could look like

All eyes now turn to the Autumn Budget 2025House of Commons, London, scheduled for 30 October 2025 at 12:30 PM GMT. Analysts anticipate a menu that could include:

• Reversing the 1.25‑percentage‑point cut to corporation tax introduced in April 2023, taking the rate back to 25 percent for profits over £250,000.
• A modest uplift to the basic rate of income tax – likely the 1.2 p that the IFS modelled.
• Targeted relief for small‑business exporters to cushion the £8.7 billion annual trade‑barrier cost identified by NIESR.
• Potential reforms to National Insurance, balancing the £15.3 billion revenue boost against the impact on lower‑earning workers.

Financial markets will be watching the debt trajectory as well. The OBR’s latest forecast shows public‑sector net debt climbing to 99.2 percent of GDP by 2025‑26, up from 92.4 percent in 2019‑20, which translates into an extra £43.8 billion in annual interest payments.

Historical context: Brexit’s fiscal legacy

Brexit’s fiscal drag is not a new story. The 2020 Trade and Cooperation Agreement introduced non‑tariff barriers that, according to the Chancellor’s figures, have multiplied customs declarations by 8,400 percent since 2020 – roughly 425,000 weekly filings, each costing firms an average of £2,100 per year.

The European Commission recently reminded the UK that its GDP per capita remains 5.2 percent below the G7 average, a gap that the Commission attributes largely to post‑Brexit trade frictions.

All of this adds up to a picture that makes the upcoming budget a watershed moment. If Reeves sticks to her promise of tax hikes, the next few years could see the UK grappling with a fiscal environment reminiscent of the early 1970s, when high inflation and weak growth forced governments to make hard choices.

What’s next after the budget?

Reeves has signalled that the Autumn Budget is only the first step. She hinted at a “mid‑year fiscal review” that would track the impact of any tax changes and allow for course‑correction before the next Spring Budget in 2026.

Economists at the Bank of England will likely keep the base rate steady for now – it sits at 5.25 percent – but they have warned that persistent supply‑chain bottlenecks tied to Brexit could keep inflation hovering around the 3.8 percent mark seen in September 2025.

In short, the country is standing at a fiscal crossroads: raise taxes and risk slowing growth, or keep the lid on revenue and risk under‑funding public services. How Reeves navigates that tightrope will define her tenure as Chancellor and shape the UK’s economic trajectory for a decade.