Spring Statement 2025

Following the Spring Statement our tax, industry and economic specialists share their initial reactions and insights.

26 March 2025

Spending cuts kicked down the road, but tax rises looking inevitable

As we anticipated, the Chancellor stuck to her new fiscal rules for stability and investment set out in the Autumn Budget.

The Spring Statement restores the Treasury鈥檚拢9.9bn fiscal headroom through welfare and departmental spending cuts and without raising taxes 鈥� for now at least.

Also widely trailed was the Office of Budget Responsibility鈥檚 (OBR) downgrading of near-term growth in its spring forecast. Growth in 2025 is expected to come in at 1% 鈥� half of what the OBR expected last October.

Rachel Reeves鈥檚 Spring Statement did pull a small rabbit out of the hat. This was an upward revision to growth by the end of this decade. Partly this is because there is now more room for faster catch-up growth in future. It鈥檚 also because planning reforms will start to pay dividends, with a bigger economy in 2029-30 helping to boost tax receipts.

The obvious risk to the Chancellor鈥檚 outlook is that the OBR is being too optimistic. We鈥檝e also seen that it doesn鈥檛 take much for 拢10bn of headroom to be wiped out, especially in these uncertain times.

Ultimately, most of the changes set out today happen after 2027 and so they won鈥檛 impact the economy or the Bank of England for now. However, we do believe further tax rises are looking increasingly inevitable at some point soon.

Tom Pugh, Economist

Spring Statement - big on cuts, light on taxation

The Chancellor鈥檚 speech focused on commitments to defence spending and building new homes. Mention of tax was limited to a further commitment to invest in HMRC鈥檚 ability to close the tax gap, building on measures announced at the Autumn Budget 2024.

No NIC reprieve for employers
Company taxation

No NIC reprieve for employers

Although there were no tax rises announced in the Spring Statement 2025, the impact of many of the Autumn Budget 2024’s measures will only take effect in the coming weeks, including the changes to employers’ national insurance contributions (NIC), forecast to raise more than £23bn a year.

As well as the changes to NIC, employers will also be impacted by the increase in national minimum wage (NMW) and national living wage (NLW) rates, also coming into effect from April 2025, and changes to employment rights as a result of the Employment Rights Bill.

Company taxation

The government set out its five-year plan for company taxation in the Corporate Tax Roadmap published at Autumn Budget 2024, with an emphasis on the stability and certainty which businesses had been calling for. Therefore, there was no expectation of wholesale change in the Spring Statement, although rumours of the repeal of the digital services tax in response to the threat of US tariffs had been circulating in recent days. No mention of such change in the Chancellor’s speech has left uncertainty as to how the situation will evolve.

Although no changes to tax were announced, businesses looking to benefit from the increased investment in the defence sector, in particular, may be able to take advantage of two key reliefs that incentivise investment by businesses – capital allowances and research and development (R&D) tax relief. The existing regimes remain in place, with relevant consultations in progress.

House-builders may also hope to benefit from an expected consultation on how land remediation relief can be used as a lever to support the Chancellor’s aspirations to get Britain building again, specifically through unlocking “grey belt” sites for development, a policy which featured heavily in today’s speech.

The Chancellor kept her commitment not to change the VAT rate, although there is a rise in penalties for taxpayers that are late to pay VAT. As VAT evasion is a significant part of the tax gap, the announcement of increased investment in HMRC resources will no doubt lead to increased VAT investigation activity for sectors where fraud is prevalent.

Businesses juggling the impact of increased costs of employment, the global threat of tariffs and the adoption of e-invoicing at least have no further changes to contend with as a result of the Spring Statement.