Spring Statement 2025: Calm for now, but structural reform and growth plans begin to take shape

Following the Budget in October 2024 which brought sweeping changes across a wide range of areas, Chancellor Rachel Reeves delivered her Spring Statement on the UK Economy.

As widely expected, there were no major changes with the Government sticking to their plan and making minor adjustments to keep the economy on course.

It is worth highlighting that whilst things are largely on track, the risk of inflation is still bubbling away in the background, forecast to average 3.2% this year, an increase on the 2.6% forecast previously but subsequently expected to fall to 2.1% next year. Despite this, the reaction from the investment markets was very limited, likely because there are currently much bigger concerns in the world which are driving volatility.

With the Office for Budget Responsibility (OBR) downgrading forecasts for growth in 2025 to 1% and limited by self-imposed spending rules with a commitment not to raise taxes further, it seemed inevitable that there was going to be a focus on cutting costs. Rachel Reeves took this opportunity to reiterate her statement that short term decisions were not going to deliver a long-term stable economy and that we had to allow time for changes to play out, this view is supported by an upgrade to OBR forecasts of growth from 2026 onwards.

Changes to welfare in the Spring Statement 2025

Welfare has come under scrutiny with the bill previously expected to rise significantly over the course of this parliament, the Government announced plans to crack down on the number of people claiming Personal Independence Payments by putting in place stricter eligibility tests. The intention is to get those who can work, back to work and only supporting people on benefits who are unable.

A more efficient civil service is also in the Chancellor’s sights with a target to reduce administrative costs of government by 15%. At odds with a reduction in spending was a commitment to spend 2.5% of the budget on defence, an increase on the amount announced previously, funded by reducing expenditure on overseas aid.

Cracking down on tax evasion

There is also a clear focus in this Statement of an intention to crack down on tax evasion with serious investment into HMRC enforcement, alongside an increase in penalties for late payment. We would encourage all clients to not be complacent about their tax declarations and if you are unsure seek advice to ensure you are correctly filing your returns.

A housebuilding revolution

Pointing to the impact of global economic events leading to the downgrade in forecasts, Rachel Reeves is accelerating her plans to structurally change the UK economy by going “further and faster.” She is pushing ahead with plans to kick-start a housebuilding revolution that will create jobs across the country, expected to be the biggest factor contributing to economic growth by 2030, as forecast by the OBR.

Individual Savings Account (ISA) reforms in the Spring Statement 2025

Buried in the detail was an announcement that the Government is looking at reforms to the Individual Savings Account (ISA) system to try to encourage a culture of investing amongst the population, supporting their ambitions for growth. There are no indications as to what this would look like currently but watch this space, as changes could be on the way.

The UK is known for having a high level of cash savings and a low level of investment amongst the public and there is speculation that the cash ISA allowance could be reduced to encourage more money into investments.

Managing individual wealth

Whilst there were no significant changes impacting individual wealth, it is worth reviewing the changes made in October and your own personal situation to ensure that you understand how these will affect you and ways that you can mitigate the impact. With taxes at an elevated level, it is important to remember the basics and take advantage of the reliefs and exemptions available to you.

Pensions remain one of the most tax efficient vehicles despite the recent changes made, alongside ISAs, and it is important to utilise these allowances each year to maximise the efficiency of your planning.

Inheritance Tax (IHT) changes in the Spring Statement 2025

Following the changes to Inheritance Tax (IHT), there is an expectation that the amount of IHT collected will significantly increase over the next 5 years, one of the biggest contributing factors to this being the inclusion of pensions in the scope of IHT from April 2027. Following the announcement the Government entered a consultation period to determine exactly how this would be implemented, and we are expecting to see draft legislation later this year. This key change will affect how you plan and manage your wealth throughout retirement and with the layers of complexity in the pension system getting advice is key.

It is worth remembering that there is plenty of planning which can be done and is possible to reduce or even eradicate the IHT you and your family are liable to pay by making some simple planning changes. The key to addressing a growing IHT bill is seeking advice and starting your planning journey early to maximise the number of options available to you.

The comprehensive guide: How the Spring Statement 2025 affects you

With expert contributions from 14 advisors across corporate tax, personal tax, wealth management, private client, R&D tax relief and more, this is THE comprehensive guide on how the Spring Statement 2025 affects you.

Whether you’re a company director, entrepreneur, or an individual managing your wealth, download the guide and speak to our team to navigate the financial landscape and prepare for what may lie ahead.

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