The Spring Statement 2025
Chancellor Rachel Reeves has delivered her Spring Statement for 2025. As promised, the Statement does not propose any tax hikes, but it does reveal a downgrading of the growth forecast in a brief and gloomy precursor to the Autumn Budget. However, the Chancellor restored the government’s fiscal leeway to £9.9 billion, and the Office for Budget Responsibility provided a glimmer of optimism by revising the growth outlook upwards for the following year.
Key highlights to note:
- No tax hikes, however, the government will support HMRC in tackling tax avoidance.
- £3.5 billion in annual savings on government operational costs by 2029-30.
- £3.25 billion in investments expedited for a new “transformation fund” aimed at reducing government operational costs by enhancing public service efficiency.
- The OBR has lowered growth predictions for 2025 from 2% to 1%.
- The OBR has determined that they will permanently elevate the level of real GDP by 0.2% in 2029/30, resulting in an additional £6.8 billion for the economy.
- Capital expenditure will rise by an average of £2 billion annually to stimulate economic growth.
- Housebuilding is set to achieve a 40-year peak, reaching 305,000 homes per year by the end of the forecast period, with a total of 1.3 million homes over the next five years, nearing the manifesto commitment of 1.5 million within this parliament.
- Inflation dipped to 2.8% in February.
- An additional £2.2 billion will be allocated to the Ministry of Defence in the upcoming financial year to respond to growing global uncertainties.
- The government will allocate at least 10% of the MoD’s equipment budget to technologies like drones and AI, enhancing production in locations such as Derby, Glasgow, and Newport.
Here’s a summary of the key takeaways for businesses and individuals.
Business taxes
- Corporation Tax: No change
- VAT: No change.
- VAT late payment penalties: From April 2025, the new rates will be 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
- Business rates: No change
- Capital allowances: No change
- Employers’ NICs:To increase by 1.2% to 15% from April 2025 (as previously announced)
- Employment allowance:To increase to £10,500 per year from April 2025 (as previously announced)
- Regulation Action Plan: The government commits to cut the administrative costs of regulation on business by 25% by the end of the Parliament
Personal taxes
- Income tax: No change
- Tax thresholds: Frozen until 2028 (as previously announced)
- Employees’ National Insurance contributions: No change
- Self-employed National Insurance: No change
- Making Tax Digital (MTD): The rollout of MTD for Income Tax Self-Assessment (ITSA) will be extended to include sole traders and landlords with incomes over £20,000 from April 2028
- Unpaid taxes: New crackdown on tax evasion and fraud
- Non-domiciled taxation: Non-dom status will be abolished from April 2025. It will be replaced it with a residence-based regime (as previously announced)
- Capital Gains Tax: No change
- Business asset relief: The Business Asset Disposal Relief rate will increase from 10% to 14% from April 2025 (as previously announced)
- Capital Allowances: No change
- Inheritance tax: Threshold frozen until 2030 (as previously announced)
Duty rates
- Fuel Duty: No change
- Alcohol Duty: No change
- Stamp Duty Land Tax: Cuts to Stamp Duty Land Tax will end on 31 March (as previously announced). Stamp Duty will be payable on the purchase price of properties over £125,000 from 1 April
Other key changes
- National Living Wage: Rises from £11.44 to £12.21 per hour in April 2025 (as previously announced)
- State pensions: 1% increase in April 2025 thanks to the triple lock; pension credit will also rise by 4.1% in April 2025 (as previously announced)
We’ll be keeping a close eye on the reactions to the Chancellor’s Spring Statement, in the meantime you can read the full Spring Statement Report here.