After Rachel Reeves’ impactful first Budget in autumn 2024, you might have been concerned about the announcements that would be included in her Spring Statement on 26 March 2025.
Reassuringly, the major headline from this year’s springtime fiscal event is that Reeves made few announcements that are likely to affect you and your personal finances directly. Although, it did reveal that none of the changes made in the Autumn Budget would be overturned. However, one significant change has been made to the High Income Child Benefit Charge, which could affect you or your family.
The chancellor did announce that, due to global uncertainty and after the economy declined in January, 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. She also noted the OBR’s long-term forecast, indicating that growth would increase for each year remaining in this parliament.
In addition to growth figures, the chancellor’s Statement introduced a range of measures designed to increase economic activity in the UK, as well as cost-saving initiatives, predominantly at state level, to reduce government debt.
Read on for your summary of the chancellor’s 2025 Spring Statement.
Personal tax thresholds and allowances are set to remain unchanged
Those who were concerned the chancellor would announce sweeping changes that might affect their personal finances will be breathing a sigh of relief as many worries didn’t materialise.
Personal tax
Reeves stuck to a pre-Spring Statement commitment to not increase personal taxes.
So, Income Tax thresholds and rates will remain unchanged, and thresholds are frozen until April 2028. As a result, your Income Tax liability is likely to rise in real terms.
Similarly, the rates and thresholds for paying Capital Gains Tax (CGT) and Dividend Tax will remain the same.
Individual Savings Accounts (ISAs)
Before the Spring Statement, the government was reportedly considering reducing the amount you can tax-efficiently place in a Cash ISA each tax year to £4,000 in a bid to encourage greater investment.
The good news is the ISA subscription limit will remain at the current level (£20,000) in the 2025/26 tax year. The ISA subscription limit is frozen until 2030.
The Junior ISA (JISA) allowance will remain at £9,000 in 2025/26.
However, the government did note it will continue reviewing ISA reform options to improve the balance between cash and equities to earn better returns for savers, boost the culture of retail investment, and support its growth mission.
Pensions
Last year, the government announced a new Pension Schemes Bill, which will legislate several areas of pension policy. However, further reforms weren’t announced in the Spring Statement.
The Annual Allowance will remain at £60,000 in 2025/26. Your Annual Allowance may be lower if your income exceeds certain thresholds or you have already flexibly accessed your pension.
As usual, there was also speculation that the amount you could withdraw from your pension tax-free would be reduced, but this has remained unchanged. So, when you reach the normal minimum pension age (55, rising to 57 in 2028), you may withdraw up to 25% of your pension (up to a maximum of £268,275) before paying Income Tax.
State Pension
As expected, there were no announcements relating to the State Pension or the triple lock, which guarantees the State Pension will increase every tax year by either the rate of inflation, average earnings growth, or 2.5%, whichever is higher.
As a result, the full new State Pension will pay a weekly income of £230.25 in 2025/26.
High Income Child Benefit Charge reforms will come into place this summer
Although the chancellor did not explicitly announce the change, the Spring Statement document revealed that those who pay the High Income Child Benefit Charge will be able to do so through PAYE from summer 2025.
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 this year, the government is making it easier for families to pay the charge without needing to submit a tax return.
Inflation is forecast to meet the Bank of England’s 2% target by 2027
After reaching a 40-year high of 11.1% in October 2022, inflation, as measured by the Consumer Prices Index (CPI), has gradually fallen, bringing it closer to the Bank of England’s (BoE) target of 2%.
The chancellor announced in her Statement that in the 12 months to February 2025, inflation rose by 2.8%, down from 3% in January. Now that inflation is better under control, the BoE has cut its base rate three times since the general election, bringing the rate down from 5.25% to 4.5%. These cuts mean borrowers will likely pay less while savers may see their interest payments fall.
It was then announced that, according to the OBR’s forecast, inflation will average:
- 3.2% in 2025
- 2.1% in 2026
- 2% in 2027, 2028, and 2029 – the BoE’s target rate.
The key fiscal announcements from the 2025 Spring Statement
The chancellor’s speech largely revolved around changes to government spending and investment. Some of the key measures and announcements included in the Statement were to:
- Increase defence spending to 2.5% of GDP by 2027, including providing an additional £2.2 billion to the Ministry of Defence next year
- Rebalance payment levels in Universal Credit to incentivise people into work, and review the assessment for Personal Independence Payments, with the OBR stating these changes will save £4.8 billion from the welfare budget in 2029/30
- Crack down on promoters of tax avoidance schemes, as initially announced in the Autumn Budget in October 2024
- Invest £2 billion in social and affordable housing, so housebuilding reaches a 40-year high that helps put the government on track to reach its target of building 1.5 million homes by the end of this parliament
- Introduce a £3.25 billion Transformation Fund to streamline public services using technology and Artificial Intelligence, making the government “leaner and more efficient”. Additionally, government departments will reduce their administrative budgets by 15% by the end of the decade.
2024 Autumn Budget changes remain intact
In October 2024, the chancellor announced a series of tax-raising measures during the Autumn Budget, some of which could have affected your personal finances. These included:
- Inheritance Tax (IHT) will be levied on unused pension benefits from April 2027.
- Agricultural Property Relief and Business Property Relief will be reduced from April 2026.
- CGT rates for non-property gains were raised in line with property rates with immediate effect, and Business Asset Disposal Relief and Investors’ Relief were both reduced.
- Employer National Insurance contributions (NICs) will rise from April 2025, from 13.8% to 15%, and the threshold at which employers start paying NICs will also fall.
- Income Tax thresholds will remain frozen until 2028.
- The IHT nil-rate bands will remain fixed 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.
- The Stamp Duty Land Tax surcharge on second home purchases rose from 3% to 5% from 31 October 2024.
- 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.
