Spring Statement 2025: What does it mean for you?

On 26th March 2025, Chancellor Rachel Reeves delivered the Spring Statement, which had been positioned as a low-key fiscal update, with the government maintaining that the primary economic event of the year remains the October Budget.

So, why have a Spring Statement? It serves as a ‘check-in’ to assess the government's progress toward its economic targets, using forecasts from the Office for Budget Responsibility (OBR) as a key measure of performance.

As expected, no new tax changes were introduced, with only peripheral policy announcements made and an update on how the wider economy is doing.

Here is a summary of the key takeaways:

Economic outlook - inflation and slow recovery

The UK’s economic growth outlook remains weak. The Office for Budget Responsibility (OBR) has halved its 2025 GDP growth forecast from 2% to 1%, highlighting ongoing economic challenges.

Inflation, however, has shown signs of easing, falling to 2.8% in February from 3% in January. The government remains optimistic, with the Chancellor forecasting that inflation will meet the Bank of England’s 2% target by 2027. The OBR predicts a 3.2% average inflation rate in 2025, declining to 2.1% in 2026 before finally reaching 2% in 2027.

US tariffs on trade pose a geopolitical risk for UK economic growth, should they be introduced, and could negate these forecasts.

Defence spending prioritised, welfare spending cut

The Statement confirmed an additional £2.2 billion for defence spending next year, part of a broader strategy to raise defence investment to 2.5% of GDP by 2027. This will fund military technology advancements and infrastructure improvements.

However, this comes at the expense of welfare spending. The health-related element of Universal Credit will be halved for new claimants and subsequently frozen, while the standard allowance will rise modestly from £92 per week in 2025-26 to £106 per week by 2029-30 – below previous expectations.

What about personal finances?

Although the Chancellor did not announce any increases to personal tax rates, the continued freeze on income tax thresholds until 2028 remains a significant factor for investors and high earners. This policy, combined with wage inflation, means more individuals will be pulled into higher tax brackets over time – effectively increasing tax liabilities through fiscal drag.

While inflation is forecast to decline, the reality is that many individuals will still see an increased tax burden despite unchanged rates.

There was no update on the State Pension or the triple lock mechanism, which guarantees increases based on the highest of inflation, average earnings growth, or 2.5%.

ISAs remain under review too – HM Government is committed to encouraging more of an investment culture in the UK.

Looking ahead

The Chancellor briefly mentioned pension reform – a comprehensive review of pensions had previously been announced, with potential changes including a rise in the State Pension age, increased investment of pension funds into UK businesses, and the consolidation of various pension schemes. Further reforms may be on the horizon in the next Autumn Budget if economic conditions deteriorate.

However, this Spring Statement offered no unexpected surprises or major policy shifts.

We will continue to monitor developments, but if you have any questions or concerns about your situation following the announcements, you can reach us on 01480 869 466 or email info@beaconwealth.co.uk.

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