It was anticipated that the Spring Statement would not offer any radical changes to the raft of tax measures announced in the Autumn Budget, but the Chancellor was under pressure to restore the headroom required to meet her fiscal rules in the face of a faltering economy and rising borrowing costs.
Reducing the cost of welfare has received much attention in recent days and cuts were confirmed in the Chancellor’s speech alongside a focus on investment in growth, increased defence spending and making government leaner.
Despite the OBR forecasting current year growth will fall to 1%, half of the previous projection, the outlook for public debt sees the UK moving to a surplus of £9.9 billion by 2029/30. This equates to growth over the coming years of 1.9% in 2026, 1.8% in 2026, 1.7% in 2028, and 1.8% in 2029.
Based on the latest forecasts there would also be an increase in GDP in real terms of 0.2% by the end of the forecast period.
Neither Labour nor the opposition mentioned the fateful word “austerity” and indeed, the measures do not revert to the cost cutting of previous Parliaments. Key announcements were a saving in government administration costs of £6.1bn, a reduction in welfare costs of £4.8bn, and increasing tax receipts by a further £1bn (to £7.5bn) through tackling tax evasion and fraud.
A repeated announcement was a commitment for 2.5% of GDP to be spent on defence, an increase of £2.2bn, funded by a reduction in overseas aid. Ten percent of this investment will be committed to military R&D alongside a £2bn fund to encourage export of this new technology.
An early announcement was that tax policy will not change, although there were some minor announcements and alterations in the detail, released during the day.
The only mention of tax during the Chancellor’s speech, other than to confirm that there would be no new tax rises announced in the Spring Statement, was the introduction of additional measures to tackle tax avoidance and evasion. This included a plan to recruit 500 new compliance officers along with other targeted measures, resulting in an estimated additional £1 billion of revenue.
There was also no mention of the controversial inheritance tax measures announced at the Autumn Statement which take effect from April 2026 and, with a consultation on the application to trusts released in February giving no concessions to the original announcement, there are no signs of a U-turn on these proposals at present.
Previously announced measures including an increase in employers’ national insurance contributions from 13.8% to 15%, along with increases to the national living wage will go ahead as planned from April 2025.
The take up of R&D advance assurance in 2023/24 led to just 80 applicants out of a total 11,500 claimants that were eligible to apply. The Government has therefore released a consultation to consider the future of advance assurance in a bid to further tackle error and fraud.
Plans to introduce making tax digital for income tax from April 2026 were also confirmed after several delays. Initially, this will apply to sole traders and landlords with qualifying income of over £50,000, bringing in those with income over £30,000 from April 2027 and it was confirmed in the Spring Statement releases that those with income over £20,000 will be mandated in from April 2028.
Further detail on the exact requirements is awaited but the Government’s commitment to the roll out is clear.
The statement publications also confirmed the previously announced plans for non-domicile status to be abolished and replaced with a residency-based system. Despite reports of non-doms leaving the UK in their droves in advance of the new rules taking effect, no changes to the regime were announced. There was, however, a caveat that the Government would continue to review the new regime to ensure the regime remained internationally competitive, which could pave the way for tweaks to the regime in the future.
One welcome confirmation was that employed individuals subject to the high-income child benefit charge will be able to pay this directly through PAYE from this summer, rather than having to register for self-assessment to report.
Also, and as trailed in advance of the statement, the Government have confirmed that they will look at options to reform Individual Savings Accounts (ISAs). No detail has been announced as to what this reform will look like as yet, however it had been rumoured that the Government may look to remove the tax breaks on cash ISAs.
As expected, and after a bumper Autumn Budget, tax barely featured in the Chancellor’s Spring Statement, but there are still lots of tax changes ahead to digest and plan for.
