Spring Statement 2025: when is it and what taxes could Rachel Reeves raise?

Telegraph

11-03-2025

Rachel Reeves unveiled a record breaking £40bn of tax rises in her first Budget last autumn.
As businesses, farmers and the everyday person continue to lick their wounds, the Chancellor will this month return to the dispatch box to lay out plans for the next six months.
Telegraph Money delves into what's on the cards for March 26.
What is the Spring Statement?
It technically isn't a Budget, and this year it's going by the official name of a Spring Forecast.
This is the Autumn Budget's little brother. Rather than being a full-blown Budget, this month's event is a smaller affair.
It is to provide an update on the Government's plans for the economy based on the latest forecasts from the Office for Budget Responsibility (OBR).
These forecasts, which look at the future performance of the economy, are published twice a year.
March 26 will see Ms Reeves address the latest OBR forecast. It's not necessarily about setting new taxation plans, but they aren't completely off the table.
What taxes could Rachel Reeves increase?
Economists have warned that Rachel Reeves has wiped out the £9.9bn headroom she left herself in last year's Budget.
As a result, she needs to take action – whether by enforcing tax rises or introducing spending cuts.
It is believed the Chancellor favours the latter, with the Spring Forecast reportedly containing £6bn pounds of public spending cuts.
Since Labour gained power, economic conditions have deteriorated, exacerbated by global trade disruptions, higher inflation and increasing borrowing costs. With economic growth stagnating and inflationary pressures persisting, significant cuts are needed to restore financial stability.
Ms Reeves is planning the 'politically painful' cuts to curb the ballooning sickness and disability benefits bill which is forecast to rise from £65bn to £100bn by the end of this decade.
It comes after she hinted that ministers will prioritise making efficiency savings over tax rises as part of the Government's pledge to boost defence spending.
Disability benefit changes
Some £5bn of the savings will be made through tougher tests on a disability benefit called personal independence payments (Pip), which is not linked to work, but designed to help with extra costs caused by the disability.
These payments will also be frozen in the next financial year, and not rise with inflation as usual.
Pips can be worth up to £9,600 a year, and are designed to cover extra costs for people with disabilities and other health issues.
Since they were introduced in 2013, the number of people using them has increased, especially for those citing mental health and anxiety issues.
Louise Murphy, senior economist at think-tank, the Resolution Foundation, said: 'Freezing Pip next year will result in a real-terms income loss for about four million people, 70pc of whom are in low-to-middle income households.
'The scale of eligibility restrictions required to save £5bn will change who the Government considers to be disabled. It must tread very carefully on this.'
Out-of-work benefits cuts
The Government will also overhaul worklessness benefits by increasing payments for those actively looking for jobs, while slashing those for people unfit to work, ITV News reported.
The expected changes would also raise the basic rate for Universal Credit paid to those searching for work, or in work, while cutting the rate for those judged as unfit for work.
Work and pensions secretary, Liz Kendall, announced plans last week to get rid of the binary 'can versus can't work' divide, which does not take account of the reality of fluctuating health conditions.
She said that instead of being dismissed as unable to work, disabled or sick people would receive follow-up assessments to help them return to employment.
Under the plans, even those with extreme disabilities and unlikely to ever be fit enough to work could lose money.
Tax threshold deep freeze
One option the Government could explore is to extend the freeze on tax thresholds which are currently set to expire in April 2028.
Workers pay the 20p rate of tax on income over £12,570, the 40p rate above £50,271, and 45p above £125,140. These thresholds are meant to rise in line with inflation so that workers' income does not fall in real terms.
By freezing them, the Government gets to keep a larger share of workers' rising wages.
The threshold freeze, which was originally brought in at the height of the Covid pandemic in 2021 by Rishi Sunak, is planned to end in three years' time.
But in a further blow to workers, Ms Reeves is thought to be favouring a deeper freeze, keeping the thresholds level until 2030.
Without having to explicitly raise taxes on 'working people' – which the Labour manifesto promised not to do – fixing thresholds for longer sees growing numbers of workers dragged into paying higher rates through wage growth alone.
Taxpayers on an estimated median income of £39,000 would see an extra £810 added to their income tax bills if the freeze was extended by a year, Telegraph analysis found.
Meanwhile, extending the freeze on both income tax and National Insurance contributions for two years would raise £5bn in 2028-29, according to analysis of current Bank of England inflation predictions by the Institute for Fiscal Studies (IFS).
It would also raise a further £10.1bn in 2029-30, unless inflation is higher than expected, in which case it will raise even more.
Paul Johnson, the head of the IFS, said a deeper freeze would be 'relatively politically painless', given that Ms Reeves could announce the change now but reverse it later if the economy improves.
Ripping up the cash Isa
Speculation is rife over the future of the cash Isa, with fears its tax-free saving power could be significantly reined in.
Senior City executives met with Rachel Reeves in February to discuss economic growth, and how to encourage more investment from UK savers.
The meeting proposed the simplification of tax-free savings, including limiting the cash Isa allowance to just £4,000 a year. Treasury officials said the Chancellor was 'listening to ideas'.
Currently, savers can open multiple Isas each year, and pay in £20,000 annually without generating any tax bills on their returns, whether or not they have invested the money.
Critics argue this holds back British investment potential, with cash Isa savers preferring to squirrel money away in risk-free accounts.
Analysis by The Telegraph and accountancy firm Blick Rothenburg revealed that the changes would bring in just £202m for the Treasury.
James Blower, of the Savings Guru, said: 'For the upset and rancour this will cause, it really doesn't make any sense for the Treasury to do. I think the danger, with such a low allowance, is savers don't value it at all and small ones don't bother because it isn't perceived to be worth the hassle.'