Spring Statement 2025: Key tax and economic announcements

On 26^th March 2025, Chancellor Rachel Reeves delivered the Spring Statement, updating the UK’s economic outlook and reaffirming fiscal policies introduced in the Autumn Budget. With ongoing global uncertainty and a slowing economy, many expected tax changes, but the chancellor confirmed that no major tax increases or reversals would take place.

The statement focused on growth figures and economic forecasts, tax compliance measures, and government spending plans. While tax thresholds remain frozen, measures were announced to improve enforcement, adjust welfare payments, and drive economic growth.

This article summarises the key tax and financial announcements from the 2025 Spring Statement and their potential impact.

No changes to personal tax rates and allowances

Personal tax rates, including Income Tax and Dividend Tax, remain unchanged and are set to stay at their current levels until April 2028. While this results in an increasing tax burden in real terms due to wage growth and inflation, no further increases were introduced.

Capital Gains Tax (CGT) rates also remain unchanged, following previous reforms that aligned non-property gains with property rates.

Changes to high income child benefit charge

From summer 2025, individuals subject to the High-Income Child Benefit Charge (HICBC) will be able to pay it through PAYE instead of filing a Self-Assessment tax return. This change aims to simplify the payment process.

ISA allowances maintained

For the 2025/26 tax year, the ISA contribution limit will stay at £20,000, with the Junior ISA (JISA) cap set at £9,000. The government is continuing to review potential ISA reforms to encourage more investment in equities over cash savings.

Pension taxation unchanged

There were no new announcements affecting pension tax allowances. The annual allowance remains at £60,000, and the tax-free lump sum is capped at £268,275. The state pension will increase in line with the triple lock, reaching £230.25 per week in 2025/26.

Measures to improve tax compliance

The government introduced several measures to enhance tax compliance:

• Whistleblower incentives: Individuals reporting tax evasion may receive a share of recovered funds.
• Increased HMRC enforcement: £100 million will be allocated to recruit 500 compliance officers, with an additional £87 million to support tax debt collection.
• Expanded tax fraud prosecutions: The government aims to increase tax fraud prosecutions by 20%.
• Restrictions on ‘Phoenixing’ schemes: Measures to prevent businesses from evading tax by dissolving the company and reforming under a different name.

Adjustments to late payment penalties

Starting in April 2025, the government will raise late payment penalties, especially impacting those using the Making Tax Digital (MTD) system. From April 2025, VAT taxpayers will face an increased penalty of 3%, and further changes will apply to self-employed individuals and landlords earning over £50,000 from 2026.

Tax measures from Autumn Budget 2024 remain in effect

The tax measures introduced in the Autumn Budget 2024 remain unchanged, including:

• Reductions to Business Property Relief and Agricultural Property Relief from April 2026.
• Employer NICs increasing from 13.8% to 15% from April 2025.
• Inheritance Tax (IHT) will apply to unused pension benefits from April 2027.
• VAT applied to private school fees from 1 January 2025.
• Stamp Duty surcharge on second homes increased from 3% to 5%.
• Abolition of the non-dom tax regime from April 2025.

Economic growth and inflation forecasts

The Office for Budget Responsibility (OBR) has revised the UK’s 2025 growth forecast down to 1%, compared to the 2% prediction made in October 2024. However, growth is expected to strengthen in subsequent years.

Inflation is forecast to decrease, aligning with the Bank of England’s 2% target by 2027. With inflation stabilising, interest rates have been reduced, which may lower borrowing costs but also impact savings returns.

Government spending and policy updates

The Spring Statement included several spending measures:

• Defence spending: Planned increase to 2.5% of GDP by 2027, with an additional £2.2 billion allocated next year.
• Universal credit: Payment structures revised to encourage employment, with reforms to Personal Independence payments expected to reduce welfare costs by £4.8 billion by 2029/30.
• Housing investment: £2 billion allocated to support affordable housing projects and a target of 1.5 million new homes by the end of this Parliament.
• Public sector efficiency: A £3.25 billion transformation fund will modernise government services using technology and AI, alongside a 15% reduction in administrative costs by the end of the decade.

Get in touch for support

With ongoing tax and economic changes, staying informed and planning effectively is essential. At Verallo, we provide expert tax and accounting support to help individuals and businesses navigate these developments. Contact our team for tailored advice on how these measures may impact your financial planning.

Disclaimer:

The information in this article has been sourced from the Spring Statement 2025 to the best of Verallo’s knowledge. While we strive to provide accurate and up-to-date information, we do not accept liability for any actions taken or not taken based on the content of this article. Readers are encouraged to seek professional advice tailored to their individual circumstances.