After Rachel Reeves’ impactful first Budget in autumn 2024, her Spring Statement on 26 March 2025 made few unexpected announcements.
Her stated aim is to restore the Treasury’s near £10 billion ‘fiscal headroom’ through a combination of welfare reforms and department spending cuts without further raising taxes, at least for the time being.
Against a background of global uncertainty and after the economy declined in January, the Chancellor reported the Office for Budget Responsibility (OBR) has downgraded its 2025 forecast for UK growth from 2% in October 2024 to 1% as of March 2025. However, she noted the OBR’s long-term forecast indicated an uptick in growth toward the end of the parliament, partly based on proposed planning reforms.
Despite a lack of eye-catching tax announcements, there were some points of note.
Personal tax thresholds and allowances are set to remain unchanged
Reeves stuck to her pre-Spring Statement commitment to not increase personal taxes.
The personal allowance, income tax bands and tax rates remain unchanged, and thresholds are frozen until April 2028.
Similarly, there were no further announcements in relation to capital gains tax following the changes announced in the Autumn Budget increasing the rate of capital gains tax for higher rate taxpayers on most assets from 20% to 24% and also increasing the rate of tax that would apply when Business Asset Disposal Relief is claimed from the current 10% rate to 14% from 6 April 2025 and 18% from 6 April 2026.
Individual Savings Accounts (ISAs)
Before the Spring Statement, the Government was reportedly considering reducing the amount that can be placed in a Cash ISA each tax year to £4,000 in a bid to encourage greater investment into other assets.
The good news is the ISA subscription limit will remain at the current £20,000 level in 2025/26.
Pensions
Last year, the government announced a new Pension Schemes Bill which will legislate for new rules giving more flexibility over how occupational defined benefit schemes are managed. However, no further reforms were announced in the Spring Statement.
For pension savers, the maximum value of the Annual Pensions Savings Allowance will remain at £60,000 in 2025/26. The Annual Allowance may be lower where income exceeds certain thresholds or the pension has already been flexibly accessed.
The ability to withdraw a tax-free lump sum of up to 25% of the pension on reaching the normal minimum pension age (55, rising to 57 in 2028) remains unchanged.
State Pension
There were no changes to the ‘triple lock’ which guarantees the State Pension will increase every tax year by the higher of the rate of inflation, average earnings growth, or 2.5%.
As a result, the full State Pension increases to £230.25 per week in 2025/26.
High Income Child Benefit Charge reforms will come into place this summer
Those who pay the High Income Child Benefit Charge (HICBC) will be able to do so through PAYE from summer 2025.
From 6 April 2024, the adjusted net income threshold for the HICBC increases from £50,000 to £60,000. For individuals with income above £80,000, the full amount of any child benefit payment made will be repayable, while for those with income between £60,000 and £80,000, child benefit will be repayable at the rate of one per cent for every £200 of income that exceeds £60,000.
As it stands, those who pay the charge need to register for self-assessment to do so, even if they do not otherwise need to self-assess, but the Government aims to make it easier to pay the charge without needing to submit a tax return.
Making Tax Digital
The Government has confirmed that sole traders and landlords, with certain sources of income exceeding £20,000 (e.g., self-employment income and rental income) will be brought within Making Tax Digital (MTD) for Income Tax Self Assessment from April 2028 onwards.
Taxpayers with qualifying sources of income exceeding £50,000 will be brought into MTD for ITSA from April 2026.
Research and development tax reliefs
The Government announced a consultation on extending the advance assurance process for R&D tax reliefs to reduce error and fraud, provide greater certainty to businesses and improve customer experience.
It proposes that any expanded advanced assurance system would need to be focused on companies in potentially high growth sectors.
Tackling Tax Avoidance
The Government has proposed new anti-tax avoidance measures including criminal sanctions for promoters and further expansion of the Disclosure of Tax Avoidance Schemes (‘DoTAS’) rules to more clearly target disguised remuneration schemes.
Penalties
The Government announced a consultation on simplifying and strengthening penalties for inaccuracies in self-assessment tax returns and penalties for failure to notify HMRC of a liability to income tax.
2024 Autumn Budget changes remain
The Chancellor announced a series of tax-raising measures during the Autumn Budget. These included:
- Inheritance Tax (IHT) will be levied on pensions from April 2027.
- The maximum value on which Agricultural Property Relief and Business Property Relief from IHT can be claimed at 100% will be reduced to £ 1million from April 2026.
- Capital Gains Tax rates for property and non-property gains were aligned at 18% for basic rate taxpayers and 24% for higher rate taxpayers
- Capital Gains Tax rates on gains where Business Asset Disposal Relief is claimed will increase from the current 10% rate to 14% from 6 April 2025 and increase further to 18% from 6 April 2026.
- Employer National Insurance contributions (NICs) will rise from 13.8% to 15% from April 2025 and the threshold at which employers start paying NICs will fall to £5,000.
- Income Tax thresholds will remain frozen until 2028.
- The freeze on the IHT nil-rate band will be extended for a further two years until 2030.
- VAT was levied on fee-paying schools, effective from 1 January 2025.
- The non-dom tax regime is set to be abolished from April 2025 and replaced with a new tax residence basis system.
- The Stamp Duty Land Tax surcharge on second home purchases rose from 3% to 5% from 31 October 2024.
- The main rate of corporation tax is now capped at 25% for the duration of the parliament.
While many hoped the Chancellor would row back on some or all of these measures, all remain intact.
Please note
All information is from the Spring Statement documents on this page.
The content of this Spring Statement summary is intended for general information purposes only. The content should not be relied upon in its entirety and shall not be deemed to be or constitute advice.
While we believe this interpretation to be correct, it cannot be guaranteed and we cannot accept any responsibility for any action taken or refrained from being taken as a result of the information contained within this summary. Please obtain professional advice before entering into or altering any new arrangement.