During her first Budget in October 2024, chancellor Rachel Reeves announced some significant tax changes. She increased the rate of Capital Gains Tax (CGT) with immediate effect and laid out plans to make pensions liable for Inheritance Tax (IHT) in the future.
As such, you might have been concerned about the Spring Statement and whether it would bring more tax rises that are likely to affect you.
Fortunately, when she gave her speech on 26 March 2025, Reeves didn’t unveil anything as notable as the changes she made during the Budget. However, she didn’t announce any changes to the measures set out in October 2024, meaning they will all remain in place.
She also outlined a change to the High Income Child Benefit Charge that could affect you. Further to this, the chancellor gave some crucial updates on the state of the economy and forecasts for the future.
Read on to learn more.
Growth could be slower than expected in 2025 but forecasts for the future are more optimistic
In the lead up to the election and since taking office, the government has been focused on encouraging growth in the economy.
In her Spring Statement, Reeves shared the latest forecasts from the Office for Budget Responsibility (OBR). Initially, the OBR had estimated that the economy would grow by 2% in 2025. However, according to Sky News, it halved this forecast to 1%.
Despite this initial fall, the OBR upgraded its estimates for growth each year for the rest of this parliament. This means that the government may achieve the growth it’s hoping for, but progress could be slower than first thought.
Additionally, inflation is expected to reach the Bank of England’s (BoE) target of 2% by 2027. Forecasts suggest that inflation will average:
- 3.2% in 2025
- 2.1% in 2026
- 2% in 2027, 2028, and 2029.
Bear in mind that although inflation could fall, this doesn’t mean the cost of living will come down. Instead, it will rise at a slower pace. As such, it’s still important to consider the effects of inflation on your financial plan.
Personal tax thresholds and allowances will remain unchanged
In the lead up to the Spring Statement, there was speculation about changes to certain personal tax thresholds and allowances, which did not materialise.
Personal tax
The chancellor previously stated she would not introduce further increases to personal taxes, and she kept this promise.
As such, the Personal Allowance – the amount you can earn before paying Income Tax – will remain at its current level of £12,570 until April 2028. The rates of Income Tax will also remain unchanged.
Similarly, CGT and Dividend Tax rates won’t increase.
This is positive news to some extent, yet the Personal Allowance remains frozen while your earnings could increase as wages rise. You may also generate interest and returns on cash savings and investments.
As such, more of your income could exceed the Personal Allowance, meaning you pay more Income Tax in the future. This is known as “fiscal drag” and it’s important to be aware of how this might affect your tax liability.
ISA allowances
Recently, the chancellor has come under pressure to reduce the amount you can save in a Cash ISA to £4,000 a year, to encourage individuals to invest more.
Luckily, the chancellor decided not to make this change, meaning that in 2025/26, you can still save up to £20,000 across all your ISAs.
The Junior ISA (JISA) allowance also remains at £9,000 a year for each child, and this is separate from your adult allowance.
That said, the government is committed to boosting retail investment and will continue to review the ISA subscription limits, so changes of some kind could come in the future.
Pensions
There is often concern about changes to the tax treatment of pensions in the lead up to a fiscal announcement. Fortunately, the chancellor didn’t announce any amendments.
As such, the Annual Allowance – the total amount you can contribute to your pensions each year without triggering an additional tax charge – remains at £60,000 (or 100% of your earnings, whichever is lower) in 2025/26. Your Annual Allowance may be lower if you’re a high earner or have flexibly accessed your pensions.
When you reach the normal minimum pension age (NMPA) of 55 (rising to 57 from 6 April 2028), you will still be able to withdraw the first 25% of your pensions tax-free, up to the Lump Sum Allowance (LSA) of £268,275 in 2025/26.
You may have a different LSA if you’ve already taken lump sums from your pensions in the past, or have Lifetime Allowance (LTA) protection.
The government is still reviewing the pension landscape and could change legislation in the future, so it’s important to be aware of any updates.
State Pension
Unsurprisingly, there were no changes to the State Pension amount or the “triple lock”, which guarantees the State Pension will rise each year by the highest of:
- The rate of inflation
- Average wage growth
- 2.5%.
Consequently, the State Pension amount will be £230.25 a week in 2025/26 and will likely continue rising in the future.
Changes to the High Income Child Benefit Charge will come into effect in summer
If you have children, you may be able to claim Child Benefit to help with the additional costs associated with parenting. However, the High Income Child Benefit Charge reduces the amount you can claim if you or your partner earns more than £60,000.
Your Child Benefit is reduced by 1% for every £200 your earnings exceed £60,000. As a result, if one person earns £80,000 or more, you will lose all your Child Benefit.
Bear in mind this is an individual threshold, so if you and your partner both earned £59,999, you would be entitled to the full amount. Yet, if one of you earned £80,000 and the other had no income, you would not receive any Child Benefit at all.
The chancellor did not mention any changes in her speech, but the Spring Statement document revealed a change to the way that you can pay the charge. Previously, you would need to repay any Child Benefit through self-assessment if your earnings exceeded the £60,000 threshold.
However, from summer, you will be able to make these payments through Pay As You Earn (PAYE), potentially making it easier for families who wouldn’t otherwise need to self-assess to pay the charge.
Get in touch
If you are concerned about any of the Spring Statement announcements or potential future changes, we can support you.
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 retail clients 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.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
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.