Spring Statement 2025: Key fiscal moves and what they mean for you

Chancellor Rachel Reeves is set to deliver her inaugural Spring Statement on 26th March, accompanied by fresh economic forecasts from the Office for Budget Responsibility (OBR). While traditionally seen as a mid-year check-in rather than a full-scale Budget, this year’s statement arrives at a time of heightened economic uncertainty. Businesses, investors, and households will be watching closely to see how the government navigates growing fiscal pressures.

The economic landscape has shifted significantly since the last Budget, with global instability, stagnant growth, and rising borrowing costs adding to the complexity of decision-making. This means the government will focus its approach to taxation, spending, and borrowing.

Impact on businesses and consumer demand

One of the most immediate points of interest for businesses is how any new fiscal measures will affect consumer spending. Changes in taxation or public spending could have implications for household incomes and consumer demand. Any adjustments may affect businesses in sectors such as retail, food, and services, depending on how disposable income and purchasing power are impacted.

Government’s fiscal options

To address fiscal pressures, the government has three main options:

• Increase borrowing – Government rules restrict borrowing for investment purposes rather than day-to-day spending, limiting this option.
• Adjust taxation – Measures such as maintaining tax thresholds despite wage growth (fiscal drag) could increase tax receipts without direct rate increases.
• Review public spending – Large areas of expenditure, including social security, healthcare, and education, may be considered for cost management.

Potential tax adjustments

One potential approach is fiscal drag, where tax thresholds remain unchanged even as wages increase. This results in more individuals moving into higher tax brackets over time, leading to an increase in overall tax revenue. A similar effect could be seen with pensions – if pension income rises but thresholds do not, some retirees may begin paying tax on their income when they previously did not.

Other tax thresholds, such as those for and inheritance tax capital gains, may also remain static, gradually bringing more individuals into the tax net. This method of increasing tax receipts is often implemented without requiring legislative changes, making it a relatively straightforward approach for the government to manage public finances.

Public spending and welfare considerations

The government has already hinted at potential welfare reforms, particularly in response to rising numbers of out-of-work benefit claimants. Encouraging more people back into employment could help reduce spending while simultaneously increasing tax income. Any reforms would need to balance reducing expenditure with maintaining economic stability and workforce participation.

Additional points

• There may be targeted support for businesses, such as adjustments to Employment Allowance or sector-specific relief.
• Infrastructure initiatives – Projects like creating ‘Europe’s Silicon Valley’ between Oxford and Cambridge could receive attention, aiming to drive economic growth.
• Defence spending will remain a key focus amid rising security concerns.
• Expect a focus on maintaining fiscal discipline. The Spring Statement could affect policies from the Autumn Budget, particularly regarding National Insurance (NI) and Inheritance Tax (IHT).
• Fiscal drag could impact tax brackets and IHT thresholds.
• National Insurance changes, which previously affected businesses, might be revisited.
• Changes from the 2024 Budget, set for April 2025, will be carefully weighed against future impacts.

What to expect on 26th March

The upcoming Spring Statement will provide greater clarity on the government’s fiscal approach and its implications for businesses and consumers. At Verallo, we’ll be analysing the key updates and offering a concise summary of the most important takeaways following the announcement.

For personalised accountancy, taxation and business advisory services, give us a call on 0203 912 9933 or email info@verallo.com.