Anticipation is building for Chancellor Rachel Reeves’ Spring Statement on the 26th of March, with many speculating that it could bring more important tax changes.
Snapshot Summary
Anticipation is building for Chancellor Rachel Reeves' Spring Statement on March 26th, with speculation about potential tax changes despite her commitment to one major fiscal event annually. Key areas in the spotlight include inheritance tax, employer National Insurance, capital gains tax, stamp duty, and ISAs. The Office for Budget Responsibility will also release a forecast, shedding light on the UK’s economic outlook.
Initially expected to be relatively uneventful compared to the October 2024 Budget and focussed on growth and economy rather than taxes recent discussions have suggested that the Spring Statement could see some more tax changes. In this article, we’ll explore some key areas that could be the focus of the statement, although it is to be noted that these potential tax changes remain the subject of ongoing speculation.
So, what could be in the spotlight?
Inheritance Tax Seven-Year Rule Currently, the seven-year rule allows individuals to make significant gifts (known as Potentially Exempt Transfers PET) without incurring inheritance tax, provided they live for seven years after making the gift. There have been growing discussions and some speculation that the government could extend the rule to ten years or even abolish it entirely. These changes, if implemented, could significantly impact long-term estate planning strategies for both families and business owners.
Economy – Employer National Insurance ContributionsJob vacancies are currently falling, this is mainly due to employers reducing hiring in response to rising National Insurance contribution costs, which are set to increase from April 6th. This, along with the rise in the national living wage and expanded employment rights, has made it more expensive for businesses to take on new staff. To support economic growth, Rachel Reeves may consider initiatives that reduce these costs for employers, such as an increased Employment Allowance, or perhaps a higher threshold before employers’ NIC becomes payable.
Capital Gains TaxCapital gains tax is another area that could be under review in the upcoming Spring Statement. During the Autumn Budget, the rate of capital gains tax on gains qualifying for Business Asset Disposal Relief (BADR) is set to increase from 10% to 14% starting from April 6th 2025. Additionally, a further increase to 18% is scheduled for April 2026. These changes could have significant implications for business owners and investors, particularly those looking to exit or restructure their businesses.
Stamp Duty Land TaxStamp duty thresholds are set to drop in April, leading to higher costs for property buyers. This change could impact those entering the property market, particularly first-time buyers and individuals looking to upgrade their homes, as they will face increased tax liabilities on their home purchases.
ISAsThe interest on savings held in ISAs is currently tax-free, and adults can contribute as much as £20,000 to Cash ISAs each year if they wish. The latest speculation is that the chancellor is considering cutting the annual Cash ISA allowance to £4,000. Other rumours are that the Cash ISA could be scrapped altogether.
Fiscal DragIt’s expected that fiscal drag will remain unchanged in the upcoming statement. Fiscal drag occurs when tax thresholds are frozen, causing more individuals to fall into the tax net or face higher tax rates as their income rises, even though no new tax policies have been introduced. Given its continued impact, fiscal drag remains a key concern for many taxpayers, as it increases the overall tax burden.
Economic and Fiscal Forecast
The Office for Budget Responsibility (OBR) will publish an Economic and Fiscal Forecast on the same day as the Spring Statement.
The forecast will provide an update on the UK’s economic and fiscal outlook.
Measures announced in the Autumn Budget seem to have already affected the economy. The expected increase in Employers National Insurance Contributions (NICs), combined with the planned increases to National Living Wage and National Minimum Wage and the proposals to enhance employment rights, has resulted in economic downturn and a fall in job vacancies. Inflation is rising and is expected to rise further. If there is an economic slowdown that impacts public finances, the Chancellor may need to either cut public spending or increase taxes.
As we approach the Spring Statement, several key areas of tax policy remain under scrutiny, with potential changes that could affect individuals and business owners. While the specifics remain to be seen, it’s clear that the decisions made in this statement could have significant implications for long-term financial planning and economic growth.
We are here to offer guidance and ensure that you make decisions in a timely manner. To get in touch with one of our consultants ahead of the Statement, click on the button below.
Join our experts following the Spring Statement for a Rapid Response Webinar on the 26th of March to hear a summary of key announcements, focusing on the potential impacts of any new tax policies, distilling them down to help you navigate how they will affect you and your business.
Please note: This article is provided for information only and was correct as at the time of writing (06/03/25). Any lists and details provided above are not exhaustive and are not intended to be full and complete guidance. No action should be taken without consulting detailed legislation or seeking independent professional advice. Therefore, no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this article can be accepted.
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