Spring Statement 2025

Spring Statement 2025: Everything you need to know

Whether it is a Spring Statement, Spring Budget or Spring Forecast, on 26 March the Chancellor Rachel Reeves will deliver a statement to the House of Commons. What can we expect to hear? And what do we already know is coming for the year ahead?

What will be announced?

The Chancellor has committed to a single major fiscal event each year to give stability and certainty on upcoming tax changes.

On the day of the Spring Statement, the Office for Budget Responsibility will publish an economic and fiscal forecast, which will be followed by a statement to parliament from the Chancellor. Having repeatedly said “growth is the number one mission of this government”, we expect the Chancellor’s statement to focus on growth and the economy rather than taxes.

Given the UK’s current economic outlook, there are rumours (some rather speculative) of changes to previously announced measures. That seems unlikely on 26 March, but we cannot rule out that new anti-avoidance measures could be announced, perhaps on a ‘Tax Administration and Maintenance Day’ (TAM Day) in April.

Looking ahead, the spending review that was announced after the election last year is not due to conclude until June when the Chancellor will announce departmental budgets up to 2029/30. At the same time, a final version of the Government’s promised industrial strategy should also be published.

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Economic outlook

Provided by Nina Skero, Chief Executive - Centre for Economics and Business Research

The Chancellor faces a challenging economic landscape, but just might be able to meet the fiscal rules without announcing any major policy changes

Low growth, rising inflation, and a loosening labour market – it’s hardly the dream economic environment for any Chancellor preparing to deliver the Spring Statement. To set the scene further, let’s look at how some key economic indicators have shifted since the most recent fiscal event in October of last year.

The final quarter of 2024 saw GDP grow by a modest 0.1%, which, although low, came as somewhat of a pleasant surprise following no growth in Q3. This does at least mean that the Chancellor won’t be delivering the Spring Statement in the midst of a recession. GDP per capita, which better reflects how people are feeling about the economy, has however been declining for the past two years.

Inflation started the new year at an elevated 3.0%. The jump from 2.5% the month before is explained by sharp rises in transport costs which are being driven up by energy prices, but also one-off factors such as the addition of VAT on school fees. The upward contributions from labour-heavy sectors might suggest that some businesses were getting ahead of the higher NIC bills with price rises, but as the higher rates only come into effect in April, their impact on prices, wages, and employment will take some time to properly analyse.

On the topic of employment, the unemployment rate (4.4% in the three months to November 2024) remains relatively low, but signs of a labour market loosening are aplenty. Vacancies have been declining since the summer of 2022, and the number of paid employees has similarly been in decline. The BDO Business Trends tracker, which is produced in partnership with Cebr, just saw its employment index enter contractionary territory for the first time since November 2012.

Some commentators are pointing to robust earnings growth as a counterexample of the loosening labour market. That’s not necessarily the case, however. The recent accelerations have largely been the result of the removal of a base effect. The rising national living wage will also boost earnings growth in the coming period. In my view, this will most likely be followed by increasing unemployment as firms deal with higher labour costs. Recent business surveys have pointed to firms cutting headcount at the fastest pace since the global financial crisis (excluding the pandemic period), and the higher employer NICs will add further pressure.

Given the above somewhat gloomy state of play, you might expect the Chancellor to be tempted to offer various ‘giveaways’ in the upcoming Spring Statement. However, for several reasons, I don’t expect any major announcements.

Firstly, some of the most significant policies set out in the Budget have yet to come online, so it is an awkward time for major policy moves. Secondly, the government seems committed to having one significant fiscal event per year – the Budget – and wants to treat the Spring Statement more as an opportunity to provide an update on the latest economic forecasts. There will undoubtedly be some temptation to tinker with policies if needed, but for the sake of stability, having fewer major fiscal events is a very good idea.

Hence, if the Chancellor finds herself in a position to announce that the country is on track to meet its self-imposed fiscal rules, we might not see any major policy announcements at all. That, however, is a big if. After the Budget, the borrowing buffer stood at just under £10bn – a historically low figure which didn’t leave much room for manoeuvre. With so many inputs into the forecasts, it is impossible to have certainty on the amount of current ‘fiscal headroom’, if any. I expect that it will be a close call.

If the Chancellor has to announce that the forecasts suggest we are not on track to meet the fiscal rules, her broad options are 1) tweak the rules, 2) cut spending, and 3) increase taxes. All of these options are in play, but I see the second one, cut spending, as the most likely.

Tweaking the fiscal rules would risk losing credibility with financial markets at a particularly delicate time, given recent bond market developments. Increasing taxes is also problematic, given the very significant hikes announced just months ago and the fact that many businesses and households are grappling with the effects of low economic growth. That leaves cutting spending as the Chancellor’s least bad realistic option. As any miss to fiscal rules is likely to be modest, a relatively small adjustment in spending plans would likely suffice.

All in all, the upcoming Spring Statement promises to be an uneventful and somewhat downbeat one. The Chancellor faces a challenging economic landscape but might still just scrape by and meet the fiscal rules. While significant policy changes are unlikely, cutting spending is the most viable option if fiscal rules are not met.

Tax changes to look out for in 2025

After the Spring Statement, the Finance Bill 2024-25 should be enacted by the end of March. Once this is law, we will have certainty over several changes for the 2025/26 tax year. As well as publishing a raft of consultations alongside the Autumn Budget, the Government promised many further consultations would be published in 2025. We discuss the potential impact of key consultations below and await the Government’s responses to those that have already closed. Whether updates and the expected consultations are released piecemeal or en masse on a TAM Day after Easter remains to be seen.

Personal Taxes

Following the response to the call for evidence published last year, the consultation on carried interest reform closed on 31 January. With legislation expected to be released in 2025, there is uncertainty for asset managers setting up and operating carried interest structures in the interim. Keep up to date on caried interest tax reform.

Once Finance Bill 2024-25 becomes law, we will have the full picture for what the new rules from 6 April 2025 look like. Although the Chancellor seemed to suggest in Davos that the rules would be softened, the amendments made to the Finance Bill during the Committee Stage at the end of January did not amount to as much as was hoped – so more changes may yet be made. Keep up to date on the changing rules for non-doms.

The most significant announcements made in the Autumn Budget were the proposed reforms to agricultural and business relief from April 2026 (read more on IHT business relief and how it works) and the effective abolition of the inheritance tax exemption for pensions from 6 April 2027.

The consultation on inheritance tax on pensions closed on 22 January - while we await the Government’s response, read about the basic rules for pensions.

A technical consultation on agricultural and business relief was promised by early 2025. There has been much press speculation on the IHT changes, particularly on the potential impact for farmers. It is unlikely that the Chancellor will comment on this hot potato in her statement, and whether the promised consultation will provide much more detail remains to be seen. All eyes will be peeled for any scraps of information. See IHT planning options for business owners.

The Government confirmed its commitment to making tax digital for income tax going ahead from April 2026 at the Autumn Budget. We expect that more guidance will be released during 2025 as this is a practical major change for those affected. The sign-up facility for agents is not yet available but is expected to open well in advance of April 2026 to allow time for registrations.

Corporate Taxes

Introduced in the Autumn Budget 2024, the roadmap includes commitments to key features of the system to provide stability and predictability to businesses and investors. The aim is to rebuild business confidence, support long-term planning, boost UK growth, and maintain the UK's competitive edge among major economies.

The roadmap promised consultations on several issues in 2025, including one on ‘advance tax certainty’ for major projects and an advance clearance process for research & development reliefs. These will be of interest to large corporates looking to plan for significant projects.

Consultations have been promised in Spring 2025 on the UK’s internation tax rules, this includes reforms to the UK’s rules on transfer pricing, permanent establishments, and Diverted Profits Tax. Alongside this, Pillar Two implementation continues apace, sign up for our newsletter to get updates and tips.

Indirect Taxes

It is generally anticipated that 2025 will be an eventful year for indirect taxes, with a wide array of updates to legislation, shifts in policies and significant developments in case law. Keep up to date with VAT and other indirect tax changes in 2025.

Things to look out for that were announced in the Autumn 2024 Budget include consultations on reforms to remote gambling and on consultation on a move towards mandatory e-invoicing in the UK (now open until 7 May).

Looking at global trade, Donald Trump’s return to the White House is already having a significant impact and this may also trigger legislative change in the UK. Read more on changes to US tariffs.

Employment Taxes

We don’t expect any rolling back on the April increases to employer’s NIC and the National Minimum Wage announced in the Autumn Budget.

Further ahead, mandatory payrolling of benefits in kind applies from April 2026, however, if employers want to voluntarily payroll benefits from this April for 2025-26 to test their systems, they need to register with HMRC now. There are many areas where the impact of the change will need to be managed carefully: good communication with employees will be crucial, and the work involved in updating payroll and other administrative processes should not be underestimated. Read more on practical issues for employers payrolling benefits and key takeaways.

Tackling tax non-compliance in the umbrella company market has become a high priority for the Government. Its next step will be to introduce legislation to make agencies responsible for accounting for PAYE on payments made to workers that are supplied using umbrella companies. If there is no agency, this responsibility will fall to the end client. This will take effect from April 2026 but, before then, the Government will engage with stakeholders on the proposals.

Other Taxes

Following the Autumn Budget, consultations were published on modernising some areas of tax administration and on simplifying the taxation of offshore interest. Both consultations have already closed and so we would expect a response to these before draft legislation is published.

Further consultations were promised on enhancing HMRC’s powers and sanctions to take swifter and stronger action against tax advisers who facilitate non-compliance and modernising how HMRC acquire and use third-party data to make it easier for taxpayers to get tax right first time. Aligning with the Government’s aims to close the tax gap and the HMRC IT strategy, we expect developments in these areas over the next year.