The 2026 Spring Statement, delivered on 3 March, was a low-key affair compared to the previous November Budget.
Rachel Reeves stuck to her promise of “one fiscal event, one Budget, a year”, announcing the government’s latest forecasts for the UK economy without any new tax changes.
But these forecasts might still have consequences for your financial plans. Here’s how.
Ongoing “subdued” economic growth means living standards might increase at a slower rate
The Office for Budget Responsibility (OBR) downgraded predicted economic growth this year to 1.1% (down from 1.4% at the time of November’s Budget), the BBC reports.
The House of Commons Library report also shows the OBR real-terms predictions for the following three years:
- 2026 – 1.1% (a decrease of 0.3%)
- 2027 – 1.6% (an increase of 0.1%)
- 2028 – 1.6% (an increase of 0.1%)
When growth is slow, it can have a knock-on effect on wage increases, income progression, and business uncertainty – according to ITV News, the chancellor announced that unemployment was forecast to rise to 5.3% in 2026, driven by weaker demand for labour.
A slower economy might also affect investment market stability, leading to periods of volatility due to lower corporate earnings and sector-specific downturns.
However, it’s important to note that, while slow, the market is still growing. If you have any concerns about the security of your investments, remember that markets are historically known to recover following periods of volatility.
You can also improve the stability of your investments by diversifying them across different asset classes and geographical regions.
Inflation is predicted to fall to 2.3%, which can increase purchasing power, business growth, and UK investing confidence
Since the October 2022 peak of 11.1% (source: Commons Library), inflation has been on a steady decline as the economy has slowly recovered from the effects of Covid-19.
Following this trend, the OBR predicted that inflation will average 2.3% in 2026, the BBC reports. They also expect that inflation will reach the Bank of England’s (BoE) target of 2% in 2027.
When inflation is low, the cost of living remains more stable, increasing your individual purchasing power.
Another BBC article reports that real household disposable income is expected to grow by between 0.6% and 0.9% each year until 2030. When prices rise slowly, it encourages consumers to spend and invest more. This, in turn, fuels the economy.
Low inflation is also good news for businesses, as it allows them to plan growth more effectively because their economic environment is less volatile.
From an investing standpoint, low inflation encourages investment in the UK economy, as it is more predictable and stable. This aligns with Reeves’s ambition to encourage UK investment.
That being said, due to the current conflict in the Middle East, inflation could rise in response to the spike in energy prices. If it does, it’s important to be prepared for additional pressure on your finances.
House prices are predicted to stabilise and mortgage rates might rise slightly, but geopolitical events could change things
The Spring Statement revealed mixed forecasts for property.
According to the Guardian, the OBR predicted that house prices will rise by between 2.4% and 2.9% each year between 2026 and 2030. This steady increase is in line with the rise in average incomes and indicates a resilient, stable market, which can improve seller confidence.
The OBR also predicted that average mortgage rates would rise from 4.1% this year to 4.5% by 2030, which is lower than estimated in the Budget.
However, this data does not consider the consequences of the current war in the Middle East. As mentioned previously, the situation could lead to higher inflation, causing the BoE to raise interest rates, which dictate mortgage borrowing costs.
In fact, mortgage providers have already started increasing their rates in response to changing predictions about the BoE’s future benchmark rate; the BBC reports that nearly 500 mortgage products were pulled off the shelves in two days due to the uncertainty created by the conflict.
This means if you’re on a variable-rate mortgage or are looking to buy, you could face higher mortgage costs.
Reeves confirmed the rollout of tax changes announced in previous Budgets
You will be happy to know that no new tax measures were announced in the 2026 Spring Statement. However, Reeves did confirm that changes unveiled in the 2024 and 2025 Budgets would take effect as planned.
- Tax thresholds for Income Tax and the Inheritance Tax (IHT) nil-rate bands will remain frozen until April 2031. This means more people could be affected by fiscal drag and pay more tax as these thresholds do not keep pace with inflation.
- There will be a 2% increase in the basic and higher rates of Dividend Tax from April 2026, likely affecting investors and business owners.
- If you are a landlord, tax on income earned from property will also rise by 2% from April 2027.
- Unused pension benefits will become part of the estate and therefore liable for IHT from April 2027.
These changes are poised to significantly affect financial plans. If you’re concerned about how these new rules might disrupt your goals, get in touch with your financial planner today.
Get in touch
If you’d like to know more about how the Spring Statement might specifically affect you and your financial plan, contact your Milsted Langdon financial planner today.
Please get in touch or email us at advice@mlifa.co.uk for more information.
Please note
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate tax planning.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.