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No Tax Shocks, Just Forecasts: Spring Statement 2025

Given the Chancellor has promised us only one fiscal event each year, the Autumn Budget, I was not expecting any major changes in tax legislation to be announced today, and Rachel Reeves kept to her word.

The Spring Statement was the update to the Office for Budget Responsibility’s OBR’s forecast for the UK economy it was always meant to be, plus a little more.

Rachel Reeves reminded us that the world is ever-changing both in terms of the global economy and the political landscape which is not exclusive to the UK.  A scenario that has led to lower growth forecasts and changes in the government’s spending priorities.

Up went the commitment to defence spending, with the promise this would focus on UK arms manufacturing and design, to drive growth and technological innovation.

Down went spending on the Welfare State, as heralded in the last days and weeks leading up to today’s address by the Chancellor.

I am sure that the Chancellor is disappointed in the OBR’s cut in forecasted economic growth from 2% to 1% for 2025, as well as the estimated average inflation rate for 2025 rising from the February figure of 2.8% to 3.2% for the year, over half as much again as the Bank of England’s target of 2%.

Despite these figures, Rachel Reeves looked buoyed by the forecasts that promised the government’s pledges to meet day-to-day spending from tax income and cut borrowing as a percentage of national income, would be reached before the end of this parliament.

 

So, what does this mean for your personal finances?

With inflation rising well beyond the Bank of England’s target rate, I consider it unlikely that interest rates will be cut significantly, if at all, in the coming months.

Whilst on the face of it this may be good news for savers, if inflation runs at the expected 3.2%, then given current interest rates I see available with even the highest online accounts (up to 4.50%), higher and additional rate income tax payers would see their savings go backwards in ‘real terms’ with even basic rate taxpayer struggling to stave off the risks of inflation.

Therefore, it may be prudent to review your short-term cash flow requirements and ensure you are not over-committed to below inflation savings accounts. Take time to consider alternative investments options available that may offer greater long-term growth prospects, ensuring you are using your annual Individual Savings Account (ISA) allowances before the end of this tax year and soon after the start of the new one.

It is also worth revisiting the changes announced in the last Autumn Budget that will come into effect from 6th April 2025.

The freeze on Income Tax and National Insurance thresholds will continue until 2028, pushing more of our income into higher rate income tax bands. However, with pension tax-relief unchanged, remember to explore the benefit of additional pension contributions.

Employers’ National Insurance Contributions will rise from 13.8% to 15% with the threshold on qualifying income falling from £9,100 per year to £5,000 per year. How much of the OBR’s expected increase in inflation is due to price rising industry warns us about due to this change I wonder.

Employment Allowance increases to £10,500 with the £100,000 threshold being removed, so that all employers will be eligible for this allowance.

The rate of Capital Gains Tax (CGT) on disposals qualifying for Business Asset Disposal Relief increases from 10% to 14%.

And lastly, more long-term non-domicile residents may see Inheritance Tax apply on their worldwide assets, with those ceasing to be UK Resident remaining subject to Inheritance Tax for up to 10 years after leaving the UK.

As we move on with the Autumn Budget’s implementation and the revision for growth and inflation estimates announced today, our Advisers at Craven Street Wealth will continue to be on hand to help you understand the impact of these changes on your personal position, and help you shape your financial planning for your future, whatever this may bring.

 

Contact us on 0330 320 9280, email: info@cravenstreeetwealth.com or complete our online enquiry form to discuss how government policy could impact your financial plans.

The content of this article is for information only and does not constitute formal financial advice. This material is for general information only and does not constitute investment, tax, legal or other forms of advice.

References to legislation and tax is based on our understanding of United Kingdom law and HM Revenue & Customs practice at the date of publication. These may be subject to change in the future. Tax rates and reliefs may be altered. The value of tax reliefs to the investor depends on their financial circumstances. No guarantees are given regarding the effectiveness of any arrangements entered into on the basis of these comments.

You should not rely on this information to make, or refrain from making any decisions. Always obtain independent, professional advice for your own particular situation.

Craven Street Financial Planning Limited is authorised and regulated by the Financial Conduct Authority (FCA). The FC

Terry Burgum
Chartered Financial Planner & Senior Manager
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