Spring Statement 2025: What to Expect from Chancellor Rachel Reeves
Chancellor Rachel Reeves is set to deliver her Spring Statement on 26 March 2025. The Treasury has confirmed that the Office for Budget Responsibility (OBR) has been commissioned to provide an updated economic and fiscal forecast, which will be presented to Parliament alongside this statement. While Reeves has expressed a commitment to holding only one major fiscal event per year, this spring announcement is expected to bring further tax changes.
Potential Tax Changes
Following the monumental Autumn Budget of 2024, which introduced £40bn in tax increases, the Spring Statement is likely to be more restrained but still impactful. Reeves has previously stated that no further tax rises on the scale of the Autumn Budget are planned. However, her remarks were later qualified by the Prime Minister, leaving the door open for additional increases.
While it is too late for any VAT relief on private education (due to take effect in January 2025), attention now turns to employers’ National Insurance Contributions (NICs), which are set to rise on 6 April 2025. The government may introduce relief measures, such as:
An increased Employment Allowance
A higher threshold before employers’ NICs become payable
Potential NIC relief for the charity sector, which faces significant financial pressure due to the upcoming changes
Additionally, there may be adjustments to inheritance tax (IHT) policy. Protests from the agricultural sector could prompt a revision of the proposed £1m cap on business and agricultural property relief. Another area of potential change is capital gains tax (CGT), particularly concerning the rate applied to business asset disposal relief.
Fiscal Drag and Economic Growth
One certainty is that fiscal drag will continue to increase tax liabilities. With income tax thresholds frozen, more taxpayers—including pensioners and those on the National Living Wage—will find themselves in higher tax brackets in April 2025.
The Autumn Budget’s impact on the economy is already becoming apparent. The planned rise in employers’ NICs has led to a slowdown in hiring and a drop in job vacancies. To counteract this, Reeves may introduce measures to encourage investment in employment, aiming to restore business confidence. Further challenges include:
A stagnating eurozone economy
A potential return of tariffs under the new Trump administration in the U.S.
Increased costs from rising employment rights, such as enhanced sick pay from day one
Interest Rates and Inflation
The Chancellor will also be watching the Bank of England closely. Interest rates remain at 4.75%, and while there were expectations of a rate cut, inflation concerns—partly driven by increased NIC costs being passed on to consumers—have delayed any reductions. Inflation rose to 2.3% in October 2024 and further to 2.6% in November, following an increase in the energy price cap.
Emergency Budget?
Under Reeves’ new fiscal rules, borrowing is only permitted for investment. However, should economic conditions deteriorate, she may face pressure to either cut spending or increase taxes to maintain fiscal stability. While the Treasury has ruled out an emergency Budget, the Spring Statement could become more significant if revenue forecasts weaken. A Treasury spokesperson has stated that all scenarios are being considered, leaving open the possibility of tax hikes.
Spending Review and Future Announcements
In addition to the Spring Statement, the Chancellor will conduct a Spending Review to finalize government departmental budgets for 2024-25 and set the framework for 2025-26. Between now and 26 March, further insights into the Chancellor’s tax strategy may emerge.
We will keep you updated on any developments leading up to the Spring Statement, particularly regarding potential tax increases and economic policies.
