Spring Statement 2025 at a glance

Chancellor's Spring Statement 26 March 2025

Rachel Reeves delivered her second fiscal statement following the record £40bn tax-raising Autumn Budget. Although the Chancellor says her focus is on growth, both the Bank of England (BoE) and the Office for Budget Responsibility (OBR) have halved their UK growth predictions following that Autumn Budget.

As sap rises in the spring to usher in new growth, businesses are having their own growth sapped by imminent rises in National Insurance, the National Living Wage and new employment regulations that have impacted on investment and recruitment, even before they take effect, plus the ongoing freeze on income tax thresholds - a stealth tax rise.

And on that point, it was rather disingenuous of the Chancellor to suggest that "real household disposable income will rise £500" when this appears to be only happening in about four or five years time and as long as tax thresholds are no longer frozen (para 2.47 OBR report).

The Spring Statement sees Reeves channelling George Osborne to deliver an austerity programme in all but name, in order to keep within her own tight fiscal rule of balancing the budget over a five-year term, and to cut government expenditure, a task made more difficult when inflation is running at 2.8% and the Bank of England is keeping interest rates at 4.5%,

As expected, the welfare budget is to be cut, but not by as much as was first thought. Spending will, however, increase on defence - but this is being funded from existing Treasury reserves and the already announced cuts to foreign aid.

Interestingly, HMRC's Making Tax Digital (MTD) for income tax regime will now capture sole traders and landlords with income above £20,000 from April 2028, an acceleration in time of what had previously been expected. And also not expected is HMRC's change of mind on software: taxpayers will now have to use third party software to submit quarterly returns, as HMRC's free service will not be available.

Late payment penalties for VAT and Making Tax Digital (MTD) for income tax will increase from April 2025 to:

3% of the tax outstanding where tax is overdue by 15 days; plus
3% where tax is overdue by 30 days; plus
10% per annum where tax is overdue by 31 days or more.

In addition, HMRC interest rates for late payments will be increased by 1.5% for all taxes from 6 April 2025.

Whilst no new tax rises were announced (on top of ongoing stealth taxes and rise in National Insurance), there is much speculation that these will be unveiled in the next Autumn Budget, making the Spring Statement little more than a holding exercise. The Chancellor’s self-imposed fiscal rules mean that she cannot borrow to fund day-to-day spending, so money has to be raised somewhere if further cuts to public spending are not in the pipeline.

HM Treasury Spring Statement 2025 page

Brief recap – key changes previously announced:

Tax thresholds frozen until 2028, creating the highest tax burden in 70 years.
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.
Non-dom regime abolished from April 2025 with a new residence scheme
VAT on school fees since January 2025
Furnished Holiday Lets abolished from April 2025
From 6 April 2025, most double-cab pickups treated as cars for tax purposes

Spring Statement 2025 key measures announced:

Taxes

New investment in HMRC's technology to crack down on tax evasion.
HMRC will recruit an extra 500 compliance staff this year and 600 more debt management staff in 2026
Frozen thresholds and allowances continue to keep tax burden at a 70-year high (37.7% of GDP)
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.
More details released about the new Non-dom Residence rules.

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)
Overseas aid will be reduced to 0.3% of GPD, saving £2.6bn by 2029/30.
Defence spending will reach 2.5% of GDP by April 2027 (including drones and AI)
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%
Confirmed backing for a third runway at Heathrow
Regeneration of Portsmouth naval base
Planning reforms to help growth
£600m to train up 60,000 new construction workers

Tax Tables 2025/26

Tax Tables 2025/26 (post the Autumn Statement)

Links to HM Treasury pages

Finance Act 2025

Economic background to the Budget

Further information

If you would like to discuss how these changes may affect you and/or your business, please contact your usual Bishop Fleming advisor, or speak to a member of our tax team.