Spring Statement 2025: What Was The Tax Impact?

The impact of the recent Spring statement can be more readily understood when placed within the wider context of the current UK tax policy. In particular, it’s worth noting that sweeping changes to tax legislation had already been announced by Labour in their 2024 Autumn Budget. At the time of writing, most of these changes have yet to be introduced and the associated complexities are still being assessed, particularly in terms of the expected short and long term tax impacts for both individuals and businesses.  

Headline changes announced last year:

• Increases to Capital Gains Tax (CGT) – including changes to Business Asset Disposal Relief, resulting in business owners facing increased rates of Capital Gains Tax on exit. 
• Reductions in Inheritance Tax (IHT) relief for farmers and businesses.  
• Personal pension funds to be subject to IHT from 2027. 
• Domicile concept abolished –tax residence will now dictate UK tax exposure. 
• IHT exemption on overseas assets for ‘long term non-residents’ – (10 years of non- residence). 
• New Foreign Income and Gains regime (FIG) to allow new UK ‘arrivers’ to be exempt from UK tax on overseas income and gains for up to 4 years. 
• Personal Tax allowances and tax bands remain frozen until 2028. 
• Increases to Employer National Insurance Contributions – 1.2%, plus reduction in starter threshold.  
• SDLT and LBTT (ADS) rate and band changes – increasing costs for those acquiring property.   

Many of the above changes have proved to be controversial, especially for farmers who are concerned that the IHT changes will potentially force them to sell land to pay future tax bills. Businesses are also adjusting headcounts to help manage the increase in National Insurance costs, while the latest statistics suggest that a record 10,000 millionaires have left the UK in the last 12 months, citing UK tax rates as the main reason for their departure.  

Bearing all of this mind, the Spring statement was certainly less ‘tax disruptive’ than the Autumn one. The March OBR forecast, which halved UK growth expectations for 2025 from 2% to 1%, very much influenced the decision to announce significant cuts in welfare benefits – those who rely on benefits are the people most impacted by this statement.  

Specific tax-related changes announced include:

• Investment in technology used by HMRC to clamp down on tax evasion and increase tax fraud convictions.  
• Consultations planned to help HMRC close the ‘tax gap’, which includes a review of HMRC’s data gathering powers, plus simplifying how tax-geared penalties are calculated and applied.  
• Cash ISA limits – contrary to speculation, the current £20,000 pa limit will remain in place.  
• Making Tax Digital (MTD) – is already planned to be introduced for landlords and the self-employed, forcing them to report their income every quarter, directly to HMRC. This will apply to those with income over £50,000 pa from 2026, reducing to £30,000 in 2027. Labour has now announced, that the income threshold will reduce further to £20,000 in 2028.  

Existing changes in tax policy mean that most taxpayers will continue to pay more Income Tax, mainly as a result of the freezes on allowances and tax bands. With inflation, this is one of the most effective ‘stealth taxes’ on taxpayers, resulting in more individuals moving up the tax bands and therefore paying far higher tax rates, as a direct result of this fiscal drag.  

Rachel Reeves has suggested this week that ‘real household disposable income will rise by £500’,  but everything points to this happening after some 4 or 5 years and even then, only as long as tax thresholds are no longer frozen after 2028.  

Many are feeling the immediate pain of increases in costs of living, and it appears that for most of us, rising tax bills will add to that financial burden for several more years to come.   

If you have any queries about the tax impact from the Spring statement 2025 or any of the changes announced in the 2024 Autumn Budget, please do not hesitate to get in contact with Lynn Gracie, Jill Walker, or your usual AAB contact.