On Wednesday 26th March, Chancellor Rachel Reeves delivered her Spring Statement, in which Labour provided an update on how their fiscal plans were progressing, alongside a number of new measures.
After a huge amount of gossip and conjecture in the run-up, the Statement delivered few surprises – but there was still plenty to absorb. This guide pulls together everything you’ll need to know, plus a few reminders about some of the autumn Budget policies that are only now coming into effect.
In this guide: Jump to:
Chartered Financial Planner James Whittington’s Spring Statement in 60 seconds(ish) >
Top-level headlines >
Spring Statement 2025: Our detailed analysis >
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Watch: Spring Statement in 60 seconds(ish)
TLDR (Too Long, Didn’t Read): Top-level headlines
- This wasn’t really a Budget as such and never billed as one – merely a checkpoint to see how the Government is faring in terms of delivering their plans set out in the October Budget (read more about that here)
- Rachel Reeves’ key messages were that the world has changed since October (reading between the lines, that means ‘Donald Trump’) and that to keep to her own self-imposed fiscal rules, cuts would have to be made somewhere
- This meant: cutting benefits, reducing department spending and not increasing taxes or borrowing (all things that you wouldn’t perhaps associate with a Labour government). Beyond this, there were no new announcements that will affect the majority of people
- The people most affected are those on certain benefits, with PIP recipients and those claiming the health element of Universal Credit at risk of seeing a real reduction
- The independent body of the Office of Budget Responsibility (OBR) confirmed that the economy is looking less rosy than it did in October, but from 2026 onwards we should start seeing light at the end of the tunnel
- There were no tax giveaways, which reflects the fact that we are still at an early point in the electoral cycle – tax breaks are often seen as an easy way to win votes and therefore deployed closer to general elections
- Remember that the October Budget will significantly impact business owners and those wanting to leave a legacy for their loved ones – that has not gone away!
- Most of our clients are business owners and/or want to pass on an inheritance to their loved ones and so are more impacted by that budget than previous rounds
The Detail
The Economy/Looking Forwards
- The OBR confirmed that Reeves had stuck to her own self-imposed fiscal rules (that day-to-day government spending would be met by tax receipts, and that borrowing would fall by the end of the government’s term)
- In fact, Reeves believes there will still be a £9.9bn surplus to play with by 2029. This may sound like a lot, but in order to maintain this same level from October, she has had to cut benefits and civil service jobs, which will impact millions of people
- The OBR revised down its growth forecasts from 2% in 2025 to only 1%. It specified the reasons for the drop were not to do with tax, but in fact to do with global interest rates and pessimistic consumer and business confidence
- This is likely to be a combination of uncertainties over Trump’s tariffs, combined with higher costs to companies through increases to employer’s National Insurance
- However things look healthier from 2026 onwards, with forecasts increased to 1.9% (from 1.8% in October) and then 1.8% in 2027 and 1.7% in 2028 (up from 1.5% for both years)
- Putting this into perspective, prior to the financial crisis in 2008, the average annual growth rate was 2.7%
- The increase in growth forecasts is in part down to the government’s housebuilding programme, which should create jobs (and 1.5 million homes). As will the extra £2.2bn in defence spending over the next year (£6.4bn by 2027)
- Inflation looks set to rise to 3.2% this year (up from 2.6% forecast in October), but come down much quicker than previously thought, with it hitting 2.1% in 2026 and then meeting the Bank of England’s 2% target from 2027 (2 years early)
Personal
- There are no changes to headline tax rates
- From 6th April 2025, Minimum Wage across the board is still going up above inflation and will be more closely aligned to the Living Wage
- The most significant impacts will be felt by those on certain benefits (namely PIP and the health element of Universal Credit). This amounts to a cut of £4.8bn
- By 2030, 3.2 million families will be £1,720 per year worse off
- Conversely (not balancing the books), 3.8 million families will be £420 per year better off
- Whilst Reeves is targeting a reduction in the costs of running government of 15% (£2bn per year), she acknowledges this will require an upfront investment to deliver reforms, largely through tech project roll-outs. This investment amounts to £3.25bn and will likely create short-term jobs, offsetting some of the longer-term job cuts
- Labour’s housebuilding programme and pledge to increase defence spending, particularly in “novel technologies” will likely lead to job growth in these areas
- Inflation looks set to be “higher for longer”, as we discussed in our market commentary in January. This in turn means we can expect maybe only one or two interest rate cuts throughout the rest of 2025. In other words, this is bad for people coming off fixed mortgage deals, but positive news for savers
- This inflation news, in conjunction with weak growth estimates, may come as a bit of a worry. The good news is that our clients in our advisory portfolios are very well-positioned in terms of being rewarded for holding strong levels of cash and because they are globally diversified (not holding all their eggs in a weak British basket). Sector rotation is also important as new opportunities present themselves in areas that governments are spending money on, and we will continue to take advantage of these opportunities as well.
Businesses
- As a reminder, from April, the level of National Insurance that employers have to pay is increasing from 13.8% to 15% – there have unfortunately been no changes here
- Not only that, but the point at which employers start paying this has reduced down from £9,100 pa to £5,000 pa
- The change on that portion alone will amount to an increase of £615 per employee, per year
- This is predicted to raise up to £24bn per year alone
- There is some relief for businesses though, in terms of the Employment Allowance, which up until now applied to businesses that pay less than £100,000 National Insurance in the previous tax year
- Businesses will receive a reduction of up to £10,500 in their National Insurance bill – an increase from the previous £5,000 relief
- And the £100,000 cap is being removed, meaning all businesses qualify
- This means that some small businesses could actually be better off under the new rules than before
MC’s view: As we predicted back in October, this would lead to a weaker economy. The new OBR forecasts back this up (certainly for 2025) and we wouldn’t be surprised to see the most recent forecasts revised down in October
- Depending on how businesses are valued, the increase in National Insurance (if treated as a pure employment cost) could ultimately reduce the value of your business, when you look to sell
- Two key actions you can take to mitigate the impact as a business owner are:
- Review your salary / dividend split for your own pay structure
- Utilise salary sacrifice for employee pension contributions
Investments
- As a reminder, business owners will still benefit from the £1m lifetime Business Asset Disposal Relief, which means you will pay the lower CGT rate (10% up until now) on the first £1m of profits when selling a business
- However this CGT rate is increasing from 10%, to 14% in April and will go up again to the new 18% lower CGT rate, from April 2026
- On a sale generating £1m of profit, this would eventually represent an increase of £80,000 extra in Capital Gains Tax
MC’s view: Getting your business ownership structure right is crucial. Also alternative exit options such as Employee Ownership Trusts are now looking far more attractive. If you are looking to exit your business, sooner rather than later could be more tax advantageous
- Inheritance Tax Relievable investments, such as businesses, AIM Shares, EIS and Business Property Relief Plans are losing some of their relief (more on that below)
Inheritance Tax & Estate Management
- There are no changes to the cap on Business Property Relief and Agricultural Property Relief of £1m from April 2026, announced back in October.
- Value above this level will receive 50% relief of the 40% IHT rate (i.e. value in excess of the cap will face an effective rate of 20% IHT).
MC’s view: This is bad all round! As it stands today, if you are a business owner and you die, then your children can inherit your business, completely free of any inheritance tax. This is to ensure that businesses do not have to be sold and broken up to pay very large IHT bills and ensures that the backbone of Britain – our small businesses, will continue to run, support the economy and employ people. This change throws all of that into question and can create a very uncertain future, both at a personal level and at an economic level.
- This makes legacy planning, both personally and at a business level, imperative. Now is the time to consider restructuring businesses in terms of who owns what shares.
- Equally important is ensuring you have shareholder protection in place, to ensure any IHT liabilities can be met and the business can continue in the event of an untimely death – especially where you have more than one shareholder
- We are yet to hear how the government will implement the proposed change to bring “unspent pensions” into the scope of Inheritance Tax from April 2027. HMRC has said it will publish its response ‘later in the year’
MC’s view: In our view, this is inheritance tax by stealth, given many people will have planned their inheritance tax situation using pensions over the years and are now unable to reverse those decisions, without facing very high levels of income tax.
Book a chat with us
Given the additional layers of complexity these changes bring, if you want to leave a legacy to your loved ones, now more than ever is the time to seek expert advice. A short conversation with us will give you an idea of how much action might be required – if the answer is ‘none’, we’ll say so!
Any money invested carries an element of risk and you are not guaranteed to get back the money you invested. This article does not constitute advice and you should consult your financial adviser prior to any action.
