2025 Spring Statement: Adapting to a changing world

Please note: The article does not constitute advice or any form of recommendation. Barclays Private Bank does not offer tax advice, and professional advice should always be sought.

Rachel Reeves has delivered her first Spring Statement as Chancellor. While there were no major tax changes, it did provide an interesting insight into the health of the UK economy and how the government plan to reduce fiscal spending. 

Spring is a time of transition; the evenings are lengthening and we’re beginning to feel the gentle shift towards warmer weather. However, the economic climate requires careful navigation and can’t be taken for granted. Rachel Reeves’ first Spring Statement comes against the backdrop of geopolitical uncertainty casting long shadows across global markets. This, coupled with the UK’s own domestic economic challenges has created a particularly delicate backdrop for today’s Spring Statement. In the build-up to the announcement Labour downplayed expectations of any major changes by reiterating their commitment to only having one major budget a year (in Autumn), and so it has proved, with a fairly benign announcement.  

While there may not be the same attention-grabbing headlines as the Autumn Budget, the Spring Statement – or so-called ‘mini-budget’ – still brings relevant updates for investors and gives us a better picture of the UK economy’s overall health.

Lower growth ahead 

One of the largest headlines to come out of the Spring Statement was the announcement that the Office for Budget Responsibility (OBR) has cut the growth forecast for 2025 to 1%, down from 2% originally forecast last autumn. However, the forecast further out is healthier, with the OBR raising their forecast for growth in 2026, 2027 and 2028.  

Against this backdrop, and with the government committed to reducing national debt, further cuts were deemed necessary. While no new tax increases were announced, the increase in defence spending has been accompanied by cuts to welfare. 

However, with the Chancellor insisting that the 2% inflation target will be met by 2027, this could pave the way for lower rates in the future, potentially providing a more favourable backdrop for investment growth.

ISA limit to stay in place… for now 

There had been widespread speculation about the government reducing the £20,000 ISA limit to £4,000, however changes were ruled out of the Spring Statement. For now, however, the £20,000 annual contribution limit remains in place, despite the government exploring options for reform in the future. ISAs therefore remain a straightforward and tax-efficient allowance to make use of. 

No changes to Capital Gains Tax (CGT) and Inheritance Tax (IHT) 

Last autumn the Chancellor raised Capital Gains Tax (CGT), with the lower rate increasing to 18% from 10% and the higher rate moving to 24% from 20%. This spring there were no further changes announced to Capital Gains Tax rates. This means that the annual CGT exemption stays at £3,000. CGT rates for Business Asset Disposal Relief and Investors’ Relief will rise to 14% in April 2025, aligning with the new 18% rate by April 2026. CGT rates for residential property will also remain at 18% and 24% respectively. 

The government made no announcements or comments regarding Inheritance Tax in the Spring Statement. As a reminder - in the autumn budget the Inheritance Tax threshold was frozen until 2030, with the first £325,000 of an estate inherited tax-free. This rises to £500,000 for direct descendants’ primary residences and up to £1 million if transferred to a spouse.  

From April 2027, inherited pensions, including SIPPs, will be subject to Inheritance Tax, while lifetime gifts are still exempt if given more than seven years before death, with a sliding scale for gifts made within seven years.  

Investors can reduce Inheritance Tax exposure by using annual gift allowances (up to £3,000) and gifting to children early, while placing assets in trusts may also help shield wealth.  

Although ISAs are part of an estate for Inheritance Tax, transfers to a spouse remain exempt. It’s also worth noting that inherited pensions will be subject to Inheritance Tax from April 2027. However, given the complexities with Inheritance Tax, you should always consult a financial and tax adviser before making any decisions. 

Income tax

The Chancellor reiterated her desire to clampdown on tax evasion, announcing an investment in HMRC and an increase of late payment penalties for VAT taxpayers and self-assessment taxpayers. Addressing tax evasion is obviously a big political target for the government and it is clear that the Chancellor sees this as a lever to raise revenue, with £1 billion expected to be recouped in savings. No further changes were announced to Income tax, with the current freeze due to end in April 2028.

Opportunities remain  

Despite the cuts to growth and general uncertainty surrounding the economic landscape, investment opportunities may also emerge from the Spring Statement. Sectors such as defence, housebuilding, and transport infrastructure have all received support from the Chancellor in the Spring Statement. 

While it may not have been full of surprises, the Spring Statement highlights that if one thing is constant in this world, it is change. Being proactive with your financial planning remains crucial to ensuring you have the best chance of preserving your wealth for the long term.

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