A forensic breakdown of how fiscal drag, frozen thresholds, and new levies quietly strip thousands from ordinary households – and how the BDA propose to fix this
- Executive Summary
The Autumn Budget 2025 was sold to the public as “fairness, stability, and responsibility.”
In reality, it delivers one of the largest cynical stealth tax increases in modern British history, hitting workers, families, savers, landlords, and future retirees simultaneously, the exact opposite of the government stated they would do.
This Budget extends frozen tax thresholds to 2031, erodes pension advantages, raises taxes on savings, property, and dividends, restricts ISA freedoms, and expands the reach of Inheritance Tax (IHT) through deliberate statistical deception.
The burden falls not on the wealthy, who avoid almost all of this, but on ordinary households already struggling under record housing costs, stagnant wages, and a broken economic model. Labour claim to fight for the working class, yet they are punishing them the hardest, again, just as they did under every government since 1945.
The BDA rejects this entire approach.
The solution is not more stealth taxation, but structural honesty, regional fairness, and an end to death based taxation altogether.
- Fiscal Drag: The Largest Unvoted Tax Rise of the 21st Century
The Government has extended the freeze on Income Tax thresholds to 2031.
This means:
- No increase in the Personal Allowance (£12,570)
- No increase in the 20% / 40% / 45% tax bands
- No relief from inflation pushing wages upwards
This is fiscal drag, a quiet but devastating tax rise. The Government takes more as inflation pushes your wages into higher bands.
How Many More People Get Dragged In?
OBR projections (quoted publicly by industry analysts):
- 780,000 more basic-rate taxpayers
- 920,000 more higher-rate taxpayers
- 4,000 more additional-rate taxpayers
All without a single public vote.
- Worked Examples: How Fiscal Drag Hits Real People
Below are simplified examples showing what happens when thresholds stay frozen while pay rises modestly with inflation.
£34,000 earner (UK median full-time income)
2024/25: Income Tax ~£3,186
2030/31 (frozen thresholds): ~£3,986
Annual difference: +£800
10-year cumulative impact: £7,600+
£40,000 earner
2024/25: ~£4,486
2030/31: ~£5,686
Difference: +£1,200 per year
£50,000 earner
2024/25: ~£7,486
2030/31: ~£9,486
Difference: +£2,000 per year
£75,000 earner
Increase of £3,000–£4,000 per year via fiscal drag alone.
£99,000 earner
Pushed close to the £100k taper, losing Personal Allowance at a marginal rate of 60%.
Fiscal drag hits the “squeezed middle” hardest, those with decent but not luxury incomes, who cannot escape the system through corporate structures or tax planning.
- Pension Warfare: Salary Sacrifice Clipped
From April 2029:
- NI relief on salary sacrifice for pensions is capped at £2,000
- Any contribution above that amount attracts NI for both employee and employer
What It Means:
- A £50k earner sacrificing £3,000 loses ~£80+ a year in NI
- A £99k earner sacrificing £10,000 loses several hundred
- Employers lose their NI incentive to support enhanced contributions
This is a direct attack on middle-class long-term saving.
- Tax Rises on Property, Savings, and Dividends
From 2027: Property Tax Up 2%
- Basic rate: 20% → 22%
- Higher rate: 40% → 42%
Dividend Tax Up 2% (from 2026)
- Basic: 8.75% → 10.75%
- Higher: 33.75% → 35.75%
Savings Tax Up 2%
The Personal Savings Allowance remains tiny (£1,000 basic / £500 higher).
Who loses?
Ordinary households with:
- savings
- rental income
- small investment portfolios
Not the ultra-rich – not even the comfortably rich…
- ISA & LISA Restrictions
ISAs
Under-65s can only place £12,000 of their £20,000 allowance into a Cash ISA.
The remaining £8,000 must go into risk assets.
This forces millions into stock-market exposure whether they want it or not.
Lifetime ISA
The Government intends to scrap LISA and replace it with a new, tighter “first-time buyer only” vehicle — adding more uncertainty.
- The Great IHT Deception
Now we address the core injustice: Inheritance Tax.
IHT Thresholds Frozen Since 2009
Nil-rate band: £325,000
Residence nil-rate band: £175,000
If uprated with inflation:
- NRB would be £515,000+
- RNRB would be £275,000+
The freeze is an intentional, long-term stealth tax.
IHT Discriminates by Region
The Government quotes the UK average house price (~£271,000).
This is deceptive.
True regional picture:
- London: ~£520,000
- Southeast: ~£440,000
- Southwest: ~£360,000
- East Anglia: ~£393,000
- Oxford / Reading corridor: £475k–£650k typical homes
- South Wales: £215k
- Northeast: £155k
A single national threshold is absurd.
It punishes people in active, job-rich regions and gives everyone else a free pass.
Flats vs Houses: Another Hidden Distortion
Government uses blended averages to hide the truth.
Example: Birmingham
- Median flat: £147,000
- Median house: £423,000
Yet the Government claims Birmingham’s “average property price” is manageable because they roll the two together.
The family home, the thing IHT actually targets, is almost always a house.
The system is engineered to deceive.
- BDA Policy Position: Regional, Property-Type Fairness
The BDA proposes a complete reset:
- Two Separate IHT Thresholds for Each Region
- One for flats
- One for houses
- Thresholds Set at the Median, Not the Average
Medians reflect reality.
Averages are distorted by outliers.
- Regional Boundaries Should Match Housing Markets
Examples:
- London
- Southeast
- Southwest
- East Anglia
- Midlands
- Birmingham
- Manchester
- Merseyside
- Sheffield Region
- Cardiff / South Wales
- North Wales
- Scotland Central Belt
- Highlands
- Northern Ireland
Each region gets its own median-based thresholds.
- Annual Indexation by RPI
Any freeze beyond one year must be explicitly voted on as a tax rise.
- Ending Death Tax: Tax Only on Realised Profit
IHT should never tax death itself.
The BDA model taxes only profit generated from the inherited asset, and only in specific circumstances.
- Renting Out the Property
Rental profits taxed normally.
No inheritance levy.
- Selling the Property (Profit-Based Rule)
Tax applies only if:
- The property is sold, and
- A real profit is made after clearing any mortgage, and
- The sale occurs within 10 years of inheritance.
If sold after 10 years:
No tax.
If no profit is made:
No tax.
If the property is sold immediately and has a value >1.3 regional median:
Tax is only paid on the difference between original mortgage value and the sale value.
- High-Value, Early-Sale Rule (Properties >1.5× Regional Median)
If the heir sells within 24 months, they must settle tax on the profit above the outstanding mortgage.
But crucially:
Three settlement options:
Option 1 — Lump Sum
Pay immediately.
Option 2 — Spread Over 10 Years via Tax Code Adjustment
Ideal for average earners.
If the property is sold within the 10-year window, remaining tax is taken from profit after mortgage settlement.
Option 3 — No Response Within 24 Months
HMRC takes control, sells the property, deducts tax, and returns the remainder.
No forced debt.
No punitive lump sums.
No inheritance poverty traps.
- The Moral Argument
Inheritance Tax today is:
- a regional wealth penalty
- a tax on grief
- a punishment for living near jobs
- a deliberate stealth tax via frozen thresholds
- a distortion of the housing market
- a regressive, outdated, deeply unfair relic
The BDA view is simple:
Death should never trigger taxation.
Profit should, but only when voluntarily realised.
- The BDA Alternative: Honest, Regional, Moral Taxation
- Automatic inflation-indexing of all tax bands
- No stealth freezes
- Regional, median-based property thresholds
- Separate flat/house valuations
- Abolition of death-based IHT
- Tax only on rental profit or sale profit
- Flexible repayment options
- Phase-out of IHT entirely over time
- Transparent tax code
- Stability for 20 years in pension and savings rules
This is a tax system built on:
- honesty
- regional fairness
- morality
- economic realism
- the right of families to pass on what they built
- Conclusion
The Autumn Budget 2025 is not a programme of responsibility — it is a sweeping, unvoted, stealth-driven raid on ordinary households.
- Workers pay more.
- Savers pay more.
- Landlords pay more.
- Future retirees pay more.
- Families inheriting modest homes pay more.
- The wealthy do not.
The British Democratic Alliance proposes a fundamentally different philosophy:
transparent taxation, moral taxation, regional fairness, and a complete end to death-based inheritance taxation.
- This is how we rebuild trust.
- This is how we rebuild economic stability.
- This is how we build a country that works for the many, not the few who navigate loopholes.