Headline-grabbing measures may have been in short supply but the Chancellor’s announcements could still have a significant impact on your family finances, says personal finance journalist David Prosser
Rachel Reeves was always at pains to insist her Spring Statement would not be a full budget – let alone an emergency budget, as critics portrayed it. But while the Chancellor of the Exchequer did indeed steer clear of new tax and spending announcements, it would be wrong to assume her statement won’t have an impact on your personal finances.
For one thing, some people will be directly affected by the Chancellor’s decisions – most notably, almost 3 million current and future recipients of Universal Credit, who will see the value of this benefit frozen or reduced, and around 800,000 recipients of disability benefits, who face reduced personal independence payments. The Spring Statement extended cuts that Reeves had previously announced and foreshadowed further changes to come, both explicitly and indirectly.
What may lie ahead…
On explicit changes, two areas stand out. First, the Chancellor has confirmed speculation that she is considering reforms of Individual Savings Accounts (ISAs), with an emphasis on getting “the balance right between cash and equities”. That likely means restrictions on how much money you’ll be able to put into a cash ISA in tax years to come.
Right now, the annual ISA limit is £20,000, with very few restrictions on the assets you can buy to make full use of this allowance. If you want to put £20,000 into a cash ISA – effectively a tax-free bank or building society account – that’s fine. If you prefer to put £20,000 into a Stocks and Shares ISA, investing in assets such as shares and bonds, often through a fund, that’s allowed too; there will be no tax to pay on income or capital gains these assets generate.
However, some lobbyists argue the ISA rules should be changed to encourage increased investment in UK companies. One suggestion is that by limiting the amount you can put into a cash ISA to, say, £4,000, the Government would encourage more people to invest on the stock market with their remaining ISA allowance and that could see more investment in British businesses. This might also improve long term returns for ISA savers, since stock markets have, in the past at least, tended to outperform cash over longer periods.
Such changes are, not surprisingly, backed by many firms in the investment industry, but would deprive savers of the chance to maximise cash ISA holdings. If you’re saving for shorter-term goals or feel uncomfortable with investment risk, that would be disappointing – but the Chancellor’s Spring Statement suggests this is what she’s looking at.
Any tweaks to the ISA rules by the Chancellor would be unlikely to take effect before the 2026-27 tax year, starting April. But savers may want to start thinking about how best to use their ISA allowances in the meantime.
The other area where we know change is definitely on the way is on tax avoidance, where Reeves sees an opportunity to raise money through cracking down on sharp practices.
In particular, under plans to drive up collection rates, the Chancellor has announced increases in the fines and penalties payable by businesses covered by the Making Tax Digital system. Critically, this include many self-employed people and small business owners, with the Making Tax Digital system due to be significantly expanded over the next three years.
The Spring Statement sets out an increase in the rates at which late payment penalties are charged from 2% to 3%. Penalties kick in when tax is paid 15 days late, with further penalties added after 30 days and then annually. Make sure you get organised to avoid these penalties.
…What might be on the way…
As for unspoken but likely measures to come, economists are concerned about how little room for manoeuvre the Chancellor has left herself. Reeves is absolutely committed to sticking to the fiscal rules that Labour promised to abide by in last year’s election campaign. That means she will need to act if there are any unexpectedly negative impacts on economic growth in the years to come; her margin for error here is around £10bn, much less than Chancellors usually allow.
The implication is that Reeves may have to announce further tax rises or spending cuts – or both – sooner rather than later, possibly even in her autumn budget, and there’s plenty of speculation about that. The volatility of international politics and economics, including the unpredictability of President Trump’s announcements on trade tariffs, makes it very difficult for the Government to forecast with accuracy.
It’s also important to consider the broader effects of the Spring Statement. In particular, the Office for Budget Responsibility (OBR) is now predicting that inflation will average 3.2% this year and that it won’t fall back to the Government’s target of 2% until 2027. That will make it harder for the Bank of England’s Monetary Policy Committee to cut interest rates as sharply as was previously expected.
In practice, the OBR is now predicting there will be three more rate cuts by the middle of next year, but it warns “interest rate expectations have risen”. It therefore thinks the average interest rate on mortgages will rise from around 3.7% in 2024 to a peak of 4.7% in 2028, where they will stay until 2030. For those due to remortgage in the coming months and years, this will be an important consideration.
…And what’s already here
Finally, let’s not forget about the Chancellor’s autumn 2024 measures. Some have already come into force, including a rise in capital gains tax (CGT) – from 10% to 18% for basic rate taxpayers, and from 20% to 24% for higher and additional rate taxpayers – and ongoing freezes in income tax and inheritance tax thresholds. Others take effect from April onwards.
Changes to the business asset disposal relief rules that will see many entrepreneurs paying more CGT when they sell their business apply from this month. Stamp Duty is also going up. From 1 April, the current threshold of £250,000 for paying stamp duty on a primary residence falls back to its previous level of £125,000. First-time buyers still qualify for a higher threshold, but it comes down from £425,000 to £300,000.
More increases lie ahead. Cuts to business property relief and agricultural property relief – the latter change is the measure that has caused fury amongst farmers – come into effect in April 2026, with the potential to drive up inheritance tax bills. Pension savings will become subject to inheritance tax from 2027.
Finally, it would also be a mistake to overlook the increase in employers’ national insurance that begins in April and will raise £24bn for the Treasury. The Spring Statement noted that the Office of Budget Responsibility estimates three-quarters of those costs will be passed on to employees through lower wages than they could otherwise have expected to receive.
Although this email and article may contain helpful information and tips, these are not personal advice. If you are unsure what’s best for your own personal circumstances, you should seek advice from an independent financial adviser (IFA).