Spring Statement 2025 Predictions

As we step into March, the anticipation for Chancellor Rachel Reeves' Spring Statement is reaching its peak. Despite her earlier commitment to limiting major fiscal announcements to once a year, the challenging economic conditions and strain on public finances suggest that additional tax and spending adjustments are on the horizon.

Examining the current economic landscape as the Spring Statement nears we explore predictions from our industry experts. These predictions offer insights into potential adjustments the Chancellor might consider, including changes to tax policies, relief measures for businesses and farmers, and reviews of frozen rates and allowances.

Our Expert Predictions

Read more detailed thoughts from our panel below.

Ian Haynes

Tax Director, Scotland

When Rachael Reeves stood up at the end of October 2024 as Chancellor, one of the first things that she made clear was that while she was in charge of the purse strings, there would only be one major fiscal event each year. So, when the Spring Statement was announced, a lot of people probably thought ‘well that didn’t take long for her to change her mind’ or words to that effect, surmising that Ms Reeves had already gone back on one of her promises.

I don’t doubt that the Spring Statement will be important, but I suspect that she will not use it as a platform to announce more changes to the face of tax. At one point the Chancellor stated that the Spring Statement would not be used as a tool to introduce significant tax increases, but the PM then did some back peddling on this, so we shall have to see who is really ‘steering the ship’.

A lot of the announcements from last year will be due to come into force from 6 April 2025 (including the changes to NIC for employers that will be very lucrative for the Government), so this is probably another good reason for her not to push for more increases in taxation, and if anything, have the scope perhaps to either wind back some of the things that have been clearly unpopular since they were first raised in the Autumn Budget, or introduce other changes to the tax system:

Consider increasing the employers allowance further to combat the NIC increase for smaller employers
Look at extending the new limit on Agricultural Property Relief and Business Property Relief to help business owners and farmers.
Review all ‘frozen’ rates, allowances and reliefs and consider whether increases can be made now rather than later, helping the ‘working people’.
Consider increasing the amount of tax relief at source and relief claimed by employers on pension contributions.

The economy is not where Rachael Reeves would want it to be at this point, and with the global political situation getting ever more frenetic, some clarity and calm is required. Clients are looking for some stability following the last Budget, so being reflective in a positive way and releasing some of the tax burden being imposed may be the answer.

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Nici Goldsmith

Director, Tax Advisory

Whilst the Spring Statement is not supposed to be the platform for major tax changes (as Ian said, Rachel Reeves said only one major fiscal event per year, although she has been forced to backtrack on that), this is an opportunity to do some tweaking. We are all aware that fiscal drag is bringing many more people into tax at all, as well as more people into the higher and additional rates, more estates into inheritance tax. But this is nothing new – the inheritance tax Nil Rate Band has been £325,000 since April 2009, although the Main Residence Nil Rate Band has been introduced since then, which has helped many people leaving their property to direct descendants. Many of her changes have not even become law yet – some won’t apply until 2027, such as the bringing of pensions into the inheritance tax net. So, I think she will want to see what happens and whether some of these have an impact, and what impact.

Rachel Reeves is more or less backed into a corner. On the one hand, the Government need money (a higher defence budget, for example), but too much taxation risks stifling growth. There have been many comments about the employer’s National Insurance hikes and how that will impact the number of people they can employ, for example. It is not inconceivable that she may increase the Employment Allowance or the threshold at which this is payable. Business confidence may be raised if she does something about this, as this has a knock-on effect on jobs as well as profits for employers. Whether there will be any tweaks to bring additional relief for onward transmission of businesses, or farms is questionable, I think.

I don’t think she can afford any more tax rises without tanking the economy, but I also don’t think we will see any significant changes. She has asked the OBR for a spending review, so maybe this will show something, and it is possible we may have more interest rate cuts this year, but I don’t think she can rely on the Bank of England for a Get Out of Jail Free card just yet, with the way the worldwide economies are going, but the UK economy did grow slightly higher than expected. However, the threat of US tariffs may be looming over the Government, especially with the geopolitical tensions recently over Ukraine.

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Steve Tobin

Tax Consultant, Wirral

The Bank of England downgraded its growth estimate for the UK economy from 1.5% to 0.75% and it is expected that the Office of Budget Responsibility will also downgrade previous growth forecasts.

The above has led to speculation that the Chancellor will have to take action to protect her own fiscal rules.

It is likely that, rather than further tax rises, the Chancellor will make large Government spending cuts of several billion pounds.

If there are to be any tax raising announcements, the areas which I feel that these may happen in are as follows:-

Reduction in annual contributions to cash ISA’s.
Extension of the freezing of tax free personal allowances beyond 2028
Further reforms to Inheritance Tax, possibly around Potentially Exempt Transfers and/or Gift Holdover Relief. No longer provide relief for ‘gifts out of income’.

Other changes could be around State Pensions, perhaps the ending of the ‘Triple Lock’ or increasing the number of qualifying years needed to obtain a full State Pension.

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Shazin Tayub

Director, Leicester

Employer NICs Review

The Autumn Budget 2024 announced an increase in employer National Insurance Contributions (NICs) from 13.8% to 15%, alongside a reduction in the threshold from £9,100 to £5,000, effective April 2025. Due to concerns from businesses and the charity sector, the government may reconsider this measure, potentially delaying the increase, adjusting the threshold, or offering higher Employment Allowance relief.

Inheritance Tax (IHT) Adjustments

The previous budget introduced a cap on Agricultural and Business Property Reliefs, limiting 100% relief to £1 million, with amounts above that eligible for only 50% relief. Given pushback from farmers and small business owners, the government may increase the relief threshold or alter the tapering structure to lessen the impact on family businesses. There has also been speculation about wider IHT reforms, such as revising the nil-rate band or adjusting exemptions for high-value estates.

Business Asset Disposal Relief (BADR) Reforms

BADR currently allows qualifying business disposals to be taxed at a reduced CGT rate of 10% on the first £1 million of lifetime gains. From April 2025, the rate is set to increase to 14%, followed by another increase to 18% in April 2026, aligning with lower CGT rates. The government may consider further tightening eligibility criteria, such as:

Reducing the £1 million lifetime limit, impacting larger business sales.
Extending the minimum ownership period beyond two years to qualify.

Umbrella Company PAYE Reforms

The government has expressed concerns over non-compliance in the umbrella company sector, particularly around tax avoidance and disguised remuneration schemes. A key proposal is to shift PAYE and NIC responsibility from umbrella companies to recruitment agencies or end clients by April 2026, reducing tax loopholes for temporary workers.

Capital Gains Tax (CGT) Adjustments

In Autumn 2024, the government increased CGT rates from 10% to 18% (lower rate) and 20% to 24% (higher rate) for most chargeable gains. The Spring Budget 2025 could bring further refinements, such as:

Additional increases in CGT for high-value asset disposals, particularly on property and investment portfolios.
Tighter exemptions and reliefs, such as changes to Private Residence Relief (PRR) on second homes.

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Matt Davenport

Associate Director, Chester

The March 2025 UK tax budget is expected to introduce several significant measures to address fiscal challenges while attempting to balance growth and public service funding. Key predictions for the 2025 tax budget include:

Income Tax Adjustments: The government is likely to review income tax thresholds, which have been frozen until 2028. There is speculation that these thresholds could be adjusted to account for inflation, easing the tax burden on middle-income earners. With inflation rates stabilizing, the freeze on thresholds has pushed more people into higher tax bands, causing financial strain on workers.
Vehicle Excise Duty (VED) Reforms: Following changes in 2024, it is predicted that zero-emission vehicles will no longer benefit from reduced VED rates starting in April 2025. This reform aims to standardize road tax contributions across all vehicle types, including electric cars, and bring them in line with traditional internal combustion engine vehicles.
Tax-Free Allowance for Side Businesses: The tax-free trading allowance for small-scale entrepreneurs or side hustles is expected to increase from £1,000 to £3,000. This change is designed to simplify tax filing for individuals earning small amounts from side businesses, potentially exempting up to 300,000 individuals from filing tax returns.
Council Tax Increases in Scotland: In Scotland, council tax rates are expected to rise across local authorities. Local councils may increase rates by up to 15%, affecting properties in bands A to H. This hike is part of an effort to address financial challenges within local government funding.
Potential Welfare and Tax Reforms: The government may also introduce further welfare spending cuts, focusing on Personal Independence Payments (PIP) and other benefits. These measures aim to reduce government expenditure but have raised concerns among charities and opposition parties.

Overall, the 2025 tax budget will likely focus on simplifying taxation, adjusting thresholds, and raising revenue through reforms to both individual and corporate tax policies. The government's challenge will be to balance fiscal consolidation with policies that support economic recovery and growth.

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