In today’s special Halloween edition of Friday Focus on Wealth DFM, with the budget just a few weeks away, we’re asking experts what potential budget measures they think might spook investors next month. And is it likely to prove to be a matter of trick or treat?
You can check out all the experts’ views on today’s pre-budget special edition of Friday Focus here on Wealth DFM under our Autumn Budget category
As Halloween’s mist descends, the corridors of 11 Downing Street are echoing with whispers of fiscal ghosts, stealth taxes, and long-forgotten promises. For wealth managers and investors, the forthcoming Autumn Budget on 26 November may prove more spine-chilling than seasonal. Not for its theatrics, but for what it could mean for markets, sentiment, and strategy into 2026.
Rachel Reeves’ second Budget faces plenty of headwinds: a widening fiscal gap, fragile growth, and the limits of Labour’s manifesto commitments. With the economy still struggling to regain momentum and bond markets quick to punish fiscal mis-steps, this is shaping up to be a test of both credibility and control.
Fiscal tightrope: balancing credibility and growth
Markets have long memories. The spectre of 2022’s “mini-Budget” turmoil still haunts investors, and Reeves will be acutely aware that her credibility with the bond market is paramount. Analysts are warning of a potential shortfall in revenues, with recent talk of revisions to productivity and growth forecasts reducing the Treasury’s headroom.
Reeves may be forced to redraw her fiscal rules, not abandon them as such, but flex them, to preserve market confidence while still funding public priorities. Any sign of a loosening stance could prompt gilt yields to edge higher and sterling to wobble. The Chancellor will need to convince investors she’s steering a prudent course, not summoning the ghosts of unfunded spending sprees past.
Tax tricks and stealth measures: implications for investor sentiment
Will she change tack and make a change to one of the big three earners – income tax, VAT and National Insurance? There is much speculation in the national media just now that a hike to income tax is on the drawing board, fuelled by the Prime Minister’s refusal to deny such moves are afoot in PMQs on Wednesday. If there’s no shift, the action may lie in threshold freezes, caps and reclassifications. These stealth measures quietly drag more income and gains into the tax net without any overt announcement of “tax rises”.
There’s mounting speculation over changes to capital gains tax and inheritance tax too, as well as the possible curtailment of the 25% pension tax-free lump sum for higher earners and changes to cash ISA rules. For private clients and wealth managers, these would directly influence portfolio structuring, income drawdown strategies and trust planning.
Meanwhile, any tweaks to property taxation or partnership structures could affect both direct investors and professional services sectors, adding further complexity to an already opaque landscape.
Market psychology: credibility is the real currency
The Budget will be about more than just numbers, it’s about confidence. If Reeves signals fiscal tightening, gilt yields could ease and equity markets might find comfort in policy stability. Conversely, a Budget that leans too heavily on higher taxation or spending commitments could dampen risk appetite, particularly in UK equities and domestic fixed income.
International investors, too, will be watching closely. The UK’s fiscal stance remains a key factor in foreign capital allocation decisions any perceived slippage could reignite volatility in sterling and government bonds.
Trick or treat for investors?
As always, there may be a “rabbit out of the hat” moment, a well-timed policy designed to lift sentiment. But in reality, the odds seems to favour prudence over giveaways. With limited fiscal room and elevated debt servicing costs, this Budget is more likely to deliver fiscal discipline dressed up as reform than any material “treats”.
For portfolio managers and wealth strategists, that means preparing for a range of potential outcomes: tax shifts that subtly alter after-tax returns, market reactions that hinge on credibility, and a policy tone that may prioritise stability over stimulus.
So, will Reeves’ Budget prove to be a trick or a treat for markets? To us it seems that the smart money is indicating it’ll be more of a cold chill down the spine, unless, of course, Reeves can conjure up a credible plan that keeps both investors and the bond market from getting too spooked.
