Spring Statement Summary

Rachel Reeves delivered her Spring Statement on Wednesday 26th March. The statement is not a formal budget - as Labour pledged to only deliver one per year - but rather an update on the economy since her fiscal statement last October.

Prior to the announcement, Reeves had commented that “we can't tax and spend our way to higher living standards and better public services. That's not available in the world we live in today" - indicating a focus on spending cuts rather than tax rises, which is indeed what we saw in Wednesday’s Statement.

The focus of the announcement was more ‘welfare and warfare’ than tax. Nevertheless, please read on for a summary of the key points that may affect/be of interest to business owners and operators…

Alternatively, if you have 73 hours to spare, you can find the full Statement here: Spring Statement 2025.

RE-CAP

Key changes announced previously:

• Tax thresholds frozen until 2028.

• Inheritance tax threshold frozen until 2030.

• Stamp Duty Land Tax cuts end on 31 March 2025. 

• National Living Wage rises in April 2025 to £12.21 per hour.

• Employers' NIC increases by 1.2% to 15% from April 2025 .

• Business Asset Disposal Relief rates increases to 14% from April 2025.

• From 6 April 2025, most double-cab pickups treated as cars for tax purposes.

• Non-dom status will be abolished from April 2025 with a new residence scheme introduced.

• VAT on school fees since January 2025.

• Furnished Holiday Lets abolished from April 2025.

KEY POINTS FROM THE SPRING STATEMENT

Taxes

• New investment in HMRC's technology to crack down on tax evasion.

• From Summer 2025 the High Income Child Benefit Charge (HICBC) can be paid by employed parents through PAYE, removing the need to register for Self Assessment.

• Removing the Climate Change Levy costs from the electrolysis process to create low carbon hydrogen.

• Ongoing review of reforms to Individual Savings Accounts to get the balance right between cash and equities (there had been rumours that the £20,000 annual investment limit would be cut to just £4,000).

• New consultation on advance clearances for R&D tax relief.

• Consultation on improving the quality of data acquired by HMRC for gathering tax.

• Technical note on improving the tax system through Making Tax Digital.

• Consultation on strengthening HMRC’s penalties regime for inaccuracies and failures to notify.

Business Rates

The Chancellor announced that at the Budget last autumn, the government set out a commitment to reforming the business rates system to support the High Street and boost investment and published a discussion paper on priority areas for reform. In summer, the government will publish an interim report that sets out a clear direction of travel for the business rates system, with further policy detail to follow at the Budget this autumn.

Spending

• By 2027, inflation is projected to fall to 2%, but OBR expects it to average 3.2% this year.

• £3.25bn transformation fund to bring down the costs of running government (e.g. voluntary exit schemes from the civil service).

• £2.2bn on defence spending (from existing reserves).

• Defence spending will reach 2.5% of GDP by April 2027 (including drones and AI).

• Overseas aid will be reduced to 0.3% of GDP, saving £2.6bn by 2029/30.

• UK defence innovation fund of £400m in the Ministry of Defence.

• £2bn investment in social and affordable housing.

• £3.4bn net cut to the welfare budget.

• State pension triple lock - 4.1% increase in April 2025.

• Pension credit will also rise by 4.1%.

• Planning reforms to help growth.

• £600m to train up 60,000 new construction workers.