The Chancellor, Rachel Reeves, presented her Spring Statement on 26 March 2025, accompanied by the publication of an Economic and Fiscal Forecast from the Office for Budget Responsibility (OBR). The Statement aimed to ensure that the Government stuck to its self-imposed fiscal rules, addressing a £14 billion deficit in public finances without new tax increases.
In October 2024, the Government set its new fiscal rules, which formed the backdrop of the Spring Statement. Broadly, the Government intends that day-to-day public spending, such as on welfare and public services, will be met by revenue by 2029-30, with net financial debt to fall as a share of UK economic output in 2029-30.
The Chancellor reaffirmed her commitment to one major fiscal event per year. Tax announcements were therefore limited in this update; a spending review is due in June 2025, followed by a full Budget in Autumn 2025. New announcements were focused mainly on spending decisions and administrative changes, with the key points being as follows. A more detailed briefing document is available on our website here.
- Defence spending will reach 2.5% of GDP by April 2027, funded by a reduction to the overseas aid budget to 0.3% of gross national income. There will be an immediate increase of £2.2 billion in the defence budget in 2025-26.
- The Treasury will set out plans to “increase the number of tax fraudsters charged each year by 20%” by HMRC.
- Welfare cuts will provide net savings of £3.4bn.
- Pressing ahead with planning reform will help build over 1.3 million homes in the UK within the next five years.
- A further £13 billion of capital investment will be made over the Parliament, in addition to the £100 billion uplift announced in the Autumn Budget.
- Making Tax Digital for Income Tax: sole traders and landlords with qualifying income over £20,000 will join MTD for IT from April 2028.
- Late payment penalties for VAT and Income Tax Self Assessment will be increased as they join MTD from April 2025 onwards – more than doubling, to 10% per annum where tax is overdue by 31 days or more.
- Consultations have been published on:
- From summer 2025, employed individuals liable to the High-Income Child Benefit Charge will be able to report their family’s Child Benefit payments through a new digital service and opt to pay HICBC directly through PAYE, without needing to register for Self Assessment.
- The Government is looking at options for reforms to ISAs that get the balance right between cash and equities.
- HMRC will restart ‘direct recovery’ of tax debts owed by individuals and companies who have the ability to pay but choose not to. The Government will also explore options to automate the collection of lower-value tax debts.
- New measures to close the tax gap and raise over £1 billion in additional gross tax revenue per year by 2029-30, including £87 million of investment in HMRC’s debt management capacity, moving towards more automated debt recovery, and £214 million to recruit more HMRC compliance and debt management staff.
As always, if you have any questions about the announcements, please get in touch.