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Chancellor Rachel Reeves has some stark choices to make when she presents her Spring Statement on 26 March 2025. Does that mean more tax rises are on the way?
17 March 2025
Chancellor Rachel Reeves has some stark choices to make when she presents her Spring Statement on 26 March 2025. Does that mean more tax rises are on the way?
What did she say on the day? Check out our Spring Statement at a glance.
The occasion is actually called a Spring Forecast and it's not meant to be a Budget, as Reeves says she is committed to holding only one major fiscal event per year (but we've heard that before from previous holders of the office). But with the economy contracting and hoped-for growth not happening, the Chancellor needs to cut spending, borrow more, or raise taxes.
She is also looking at cutting red tape to free up businesses, even though every government ends up adding to, rather than reducing, regulations.
A multi-year Spending Review is also due this year, and the Chancellor has already indicated that this will require the government to make savings of up to 11% of public spending. This may not be enough by itself, even if it's achievable in the face of opposition from other cabinet ministers.
Since the Autumn Budget last October, the economy has not performed as well as the Chancellor hoped and her fiscal room for manoeuvre has been heavily impacted by poor growth forecasts and increasing pressure to find £5bn of savings on the welfare budget, and to fund the Prime Minister's new promise to increase defence spending to 2.5% of GDP from April 2027.
The date of 26 March is only a few days before the start of the next tax year when employers will be hit with previously announced increases in employers’ National Insurance, as well as the rise in the National Minimum Wage. These anticipated costs have affected business confidence and have led to employers cutting back on recruitment plans and even reducing staff numbers.
Businesses will also be affected by the Employment Rights Bill, which will introduce more employee rights from day one of employment. And there is also the proposed cut in Inheritance Tax reliefs just a year away, greatly worrying business owners and farmers.
And whilst the Chancellor did recently receive some welcome news from the Bank of England with its cut in interest rates from 4.75% to 4.5%, she will not have been happy to hear the Bank's halving of its UK growth forecast for 2025.
And the Bank is also likely to delay any further interest rate cuts as inflation is again on the rise (and may be fuelled in part by the threat of US trade tariffs). The rate remains unchanged after the 20 March 2025 Bank meeting, signalling that any further cuts are some way off.
So, where does the economic growth arise if businesses appear to be cutting back on recruitment and investment plans because of rising taxes and employment costs?
Will this fiscal event see more tax rises, or will those be left until the Autumn Budget? Either way, they seem inevitable. Let's consider the current tax issues
Tax | Predictions (now or the next Budget) |
| Frozen tax allowances & thresholds | Currently frozen until 2028 (considered a "stealth tax"), but may be extended by a further 2 years? This may happen according to a House of Commons Library report. |
| Income tax thresholds for higher rates | Could there be a cut in the 45% additional rate threshold from £125,140 to £100,000? It seems unlikely, but not inconceivable. |
| Employer National Insurance | Will rise from 6 April 2025 from 13.8% to 15%, and the threshold at which it is payable reduces from £9,100 to £5,000. But could the Chancellor go further with these rises? |
| Employment Allowance | Will rise from 6 April 2025 from £5,000 to £10,500. Could there be new conditions to its use? |
| Employee National Insurance | Although no changes yet proposed that would directly impact on workers, could the Chancellor reverse the 2% employee NIC cut made by Jeremy Hunt in January 2024? It would be unpopular, but would raise significant revenue. |
| National Living Wage (NMW) | Not a tax change as such, but the NLW will rise by 6.7% from 1 April 2025 to £12.21 per hour. |
| Individual Savings Accounts (ISAs) | There has been much debate on reducing the annual cash ISA investment limit from the current £20,000 to as low as £4,000. Could this happen? Could the Lifetime ISA be scrapped? |
| Pension tax relief | Could we move to a flat rate of pension tax relief? Many Chancellors have considered it, so there could be a consultation on it. |
| Pensions and Inheritance Tax | Pensions are to be brought into the scope of Inheritance Tax from April 2027, penalising those who have saved. Will the Chancellor reconsider this proposal? |
| Capital Gains Tax (CGT) | The CGT rates increased in the Autumn Budget from 10% to 18% for basic-rate taxpayers, and from 20% to 24% for higher-rate taxpayers. Could they be raised even further? Business Asset Disposal Relief CGT rate increases from 10% to 14% from April 2025, affecting those selling their businesses There have previously been rumours of aligning CGT rates with those of income tax - this could still happen. |
| Inheritance Tax (IHT) | We know that Business and Agricultural Property Reliefs are to be restricted from April 2026, but could the Chancellor go further by restricting lifetime gifts and the 7-year window for potentially exempt transfers? |
| Wealth Tax | The Chancellor has rejected calls for a 2% wealth tax "for the time being", but has not ruled it out completely for a future Budget. |
| Double-Cab-Pickups (DCPUs) | From 6 April 2025, most DCPUs will be treated as cars for the purposes of capital allowances, benefits in kind, and business expense deductions. |
| Furnished Holiday Lets (FHLs) | Tax regime for Furnished Holiday Lets abolished from 6 April 2025 for individuals and from 1 April 2025 for companies. It was George Osborne that started the assault on landlords; will Rachel Reeves continue with even more Landlord tax hikes? |
| Non-Doms regime | Significant changes from 6 April 2025 based on residence. |
| Stamp Duty | Stamp Duty threshold drops from £425,000 to £300,000 on 1 April 2025. |
| Corporation Tax | No changes are likely |
| Business rates | Business rate discount for retail, hospitality, and leisure drops from 75% to 40% |
| Council tax | Significant increases in council tax from 1 April 2025 for many councils. |
| Tourist tax | Consideration being given to tourist taxes for certain cities |
| Digital Services Tax | There are strong rumours that the Digital Services Tax, targeting Amazon, Apple and Google, could be watered down or scrapped as part of a tariff deal wit the US. |
| Tax Returns | Increased penalties for late submission of personal tax returns and late payment of tax have been rumoured. |
On 20 March 2025 the House of Commons Library published a background briefing to the Spring Statement, suggesting that there may be some tax policy announcements.
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.
[Gary Mackley-Smith]
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