Whilst for many, the 2024 Autumn Budget was met with mixed reviews, there was less noise and impact around the 2025 Spring Statement, delivered last week by Chancellor Rachel Reeves.
A positive sign of things to come for the UK economy? A temporary pause in any alterations to tax? Or a neutral Statement in a bid to bid to keep the budget deficit and markets happy.
Whatever your view on the 2025 Spring Statement, here are the key announcements and a few details that may have flown under the radar.
What was announced?
- In a bid to build more homes, there was proposed planning reforms to reduce legislation and paperwork in the planning process; a key move to help bring the Government’s homebuilding target of 1.5 million new homes over five years within reach.
- Whilst the Office for Budget Responsibility (OBR) downgraded its outlook for UK growth from 2% this year to 1%, it has improved its medium-term growth forecasts to 1.9% in 2026, 1.8% in 2027, 1.7% in 2028 and 1.8% in 2029.
- The Chancellor also announced increased defence spending from 2.3% of gross domestic product (GDP), to 2.5% by 2027; an increase which represents an additional spend of just over £2bn.
- Cuts to Welfare spending via Universal Credit and Personal Independence Payment (PIP).
- A streamlining of administrative budgets on government departments, aiming to increase its spending efficiency.
What was hidden behind the detail?
Closing the tax gap
- More spend focused on debt recovery of those not paying their tax receipts.
- Widening the scope of Making Tax Digital (MTD) for the self-employed and landlords
- An increase of late payment penalties for VAT and Income Tax from April 2025 for those part of ‘Making Tax Digital’
- The Government is seeking views on new measures to close in on promoters of tax avoidance schemes: “Tax avoidance is bending the tax rules to seek to gain a financial advantage never intended by Parliament”.
Individual Savings Accounts (ISAs)
- Ahead of the statement there was speculation that ISAs could change.
- There were no changes announced to ISAs.
- However, the Government is looking at options to reform ISAs to “get the balance right” between cash and equities.
- This could mean changes to ISAs in the future, potentially with the aim of encouraging investment into UK equities.
What stays the same?
Pensions
- No further announcements on pensions
- Plans continue to go ahead for Pensions forming part of Inheritance Tax from April 2027.
The OBR forecasts showed forecast for bringing pensions into IHT.
Inheritance tax (IHT) receipts are forecast to raise £8.4 billion in 2024-25, a 11.6 per cent increase on 2023-24 largely driven by higher asset prices in the second half of 2024, combined with frozen tax-free thresholds. Source OBR.uk
Tax
- No further changes announcement to rates of thresholds of Income Tax, VAT, National Insurance or Capital Gains Tax
Venture Capital Trusts (VCT) and Enterprise Investment Schemes (EIS)
- The Government continues to recognise the role of VCTs and EIS in fostering growth.
- The Government is committed to fostering a positive environment for entrepreneurs and scale ups.
This article is based on our current understanding of UK government legislation, which may change at any time. It is intended for informational purposes only and should not be considered financial advice. Please contact your Financial Planner if you require any advice.
