Relief Over Inflation — But What Now for the Budget?
Key Takeaways:
- Inflation is easing but not over — The September rate of 3.8% offers relief, yet it remains nearly double the Bank of England’s target, keeping pressure on prices and interest rates.
- The Autumn Budget will set the tone — With limited fiscal room, Chancellor Rachel Reeves must balance targeted support with restraint to avoid reigniting inflation.
- Tax changes are likely through “stealth” — Frozen thresholds and possible reforms to capital gains or inheritance tax mean individuals and businesses should review their financial structures now.
After two years of painful price hikes, the UK’s inflation rate finally appears to be cooling — but the relief may be short-lived. The latest figures show that inflation rose by 3.8% in the year to September, missing the feared 4% mark. That’s good news for households, policymakers and the Bank of England alike.
Yet, while prices aren’t rising as fast as before, the question on everyone’s mind is what comes next. With Chancellor Rachel Reeves preparing for her first Autumn Budget on 26 November 2025, the government faces a tricky balancing act: offering relief without reigniting inflation.
A Welcome Breather: What 3.8% Inflation Really Means
The latest data offers cautious optimism.
- Wages are now outpacing inflation, meaning real incomes are finally recovering.
- Food prices — one of the most visible sources of stress for families — have eased slightly for the first time in months.
- And benefits and allowances, many of which are tied to inflation, may see rises of around 6% next spring.
That combination means the sharpest edge of the cost-of-living crisis could be behind us. Yet, the scars from the past two years remain deep.
Households have endured what economists describe as “a decade’s worth of price increases in two years.” Even if the overall inflation rate drops, the public’s perception of affordability has fundamentally changed — and that affects spending, borrowing, and long-term planning.
Why Inflation Still Matters — Especially for Legal and Financial Planning
Inflation doesn’t just affect shopping bills. It ripples through almost every financial and legal arrangement.
- Wills and estates: Rising prices can erode the real value of gifts and legacies, meaning testators may need to review provisions made years ago.
- Trusts: Trustees managing inflation-linked assets or income distributions must account for purchasing-power risk when calculating returns.
- Property transactions: Mortgage rates and affordability tests still depend on the Bank of England’s decisions — which in turn depend on inflation.
- Commercial leases: Rent review clauses linked to RPI or CPI can see upward-only adjustments, even if inflation slows.
So while inflation may be falling, it’s not time to relax. Instead, it’s time to update agreements, assess exposure, and ensure clients are protected against the next economic shift.
The Government’s Balancing Act
Chancellor Rachel Reeves has signalled that she is “not satisfied” with progress on inflation — and hinted at targeted relief measures in the upcoming Budget, including possible help with energy bills.
But she faces a dilemma. Cutting taxes or expanding spending could provide short-term relief but risks re-stoking inflation. On the other hand, tightening the purse strings could cool prices further but deepen public frustration.
Economically, the UK is treading a “narrow path”:
- Growth remains sluggish, at just 0.3% over the summer quarter.
- Public borrowing is still high, with debt servicing costs eating into every department’s budget.
- Productivity has stalled.
Against that backdrop, the November Budget isn’t just about balancing the books — it’s about balancing public trust and investor confidence.
What to Expect in the November 2025 Budget
The exact contents of the Autumn Budget are still under wraps, but analysts and insiders have started to paint a picture.
1. Tax Changes — Likely via “Stealth”
Don’t expect dramatic headline tax hikes. Instead, the Treasury may rely on “fiscal drag” — keeping tax thresholds frozen so that as wages rise, more people drift into higher tax bands.
There’s also speculation around:
- Capital Gains Tax (CGT): possible rate alignment with income tax, or lower allowances.
- Inheritance Tax (IHT): tighter reliefs for business and agricultural property.
- Dividend and wealth taxes: possible adjustments targeting higher earners.
For individuals and businesses, this means now is the time to review estate plans, capital disposals and shareholdings before the Budget lands.
Parachute Law Tip:
If you’re considering transferring property, selling shares, or restructuring a trust, doing so before the Budget could mean a more favourable tax outcome.
2. Spending Restraint — The Quiet Cuts
While Reeves is unlikely to wield the axe publicly, analysts expect departmental budgets to tighten in real terms.
That means fewer resources for public services — and possibly more administrative backlogs in courts, local government and regulatory systems.
For solicitors, trustees and executors, that translates to longer processing times, delayed grants, and slower responses from government bodies. Planning early and keeping meticulous documentation will become even more important.
3. Growth Incentives — A Silver Lining?
To counteract the perception of austerity, the Budget may also include pro-business measures, such as:
- Enhanced relief for R&D and intangible investment.
- Simplified share-option schemes for small companies.
- Possible expansion of full expensing for equipment and innovation.
That could provide limited upside for clients in property development, fintech, or startups, but the overall environment will remain cautious until interest rates begin to fall.
4. The Interest-Rate Question
The Bank of England has little incentive to cut rates prematurely. Analysts expect the first reduction — dubbed a “Santa cut” — might arrive in December or early 2026, just in time for the Christmas retail period.
Until then, borrowers will face higher-than-ideal rates, and anyone refinancing property or business debt should plan accordingly.
Practical Step:
Fixed-rate deals may still offer better predictability. Encourage clients to review lending terms before the Budget announcement, as market reactions could shift rates overnight.
The Legal Ripple Effect
From a legal advisory standpoint, the combination of falling inflation and fiscal uncertainty makes this a prime time to revisit financial structures.
For Individuals
- Estate Planning: If IHT thresholds are frozen, more estates will fall into taxable territory. Reviewing wills and lifetime gifts could prevent unnecessary exposure.
- Trust Management: Trustees should check whether income distributions remain fair after inflation adjustments.
- Property Ownership: Rising valuations and frozen thresholds may trigger new tax liabilities under SDLT or CGT rules.
For Businesses
- Corporate Structuring: Companies considering mergers, acquisitions or share buybacks should account for potential tax timing changes.
- Employee Benefits: Salary adjustments outpacing inflation could affect NICs and PAYE bands.
- Commercial Contracts: Clauses indexed to inflation should be recalibrated in anticipation of slower CPI growth.
Parachute Law Tip:
A professional legal review before the Budget ensures your contracts, wills, and trusts are structured to adapt — not react — to the Chancellor’s announcements.
The Key Questions Before 26 November
As we count down to Budget Day, here are the issues that will shape both the economy and your legal strategy:
Question | Why It Matters |
Will Reeves raise CGT or align it with income tax? | Could reshape timing of asset sales and trust distributions. |
Will inheritance tax reliefs tighten? | High-net-worth estates could face increased exposure. |
Will there be targeted reliefs for businesses? | Impacts investment decisions and corporate structuring. |
Will the Budget commit to fiscal restraint? | Determines whether the Bank of England delays rate cuts. |
How will benefit uprating be handled? | Affects household budgets and debt management planning. |
So… Relief, But No Room for Complacency
For all the good news, the UK’s inflation story isn’t over. Prices may be stabilising, but household confidence and business investment remain fragile.
The Autumn Budget will be a decisive moment — not just for economists, but for families, investors, and anyone planning their financial future. Whether it’s taxes, borrowing costs or benefit levels, what happens next will shape the legal landscape for years to come.
Need Expert Legal Advice Before the Budget?
Parachute Law’s solicitors can help you plan ahead of policy shifts.
Our team specialises in:
- Wills, trusts and estate planning
- Property and co-ownership advice
- Powers of attorney and asset protection
- Tax-sensitive wealth structuring
Don’t wait for the Chancellor’s speech to act — make sure your affairs are ready for whatever the Budget brings.
Key Takeaway
Relief over inflation is welcome, but the smart move is preparation. Whether inflation falls faster or fiscal tightening bites harder, proactive legal and financial planning ensures your future remains secure — whatever the Chancellor decides next month.
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