The UK Spring Statement is due to be announced on March 26, 2025. Will the Chancellor announce more changes that may affect savings and investments?
As the UK prepares for the Spring Statement announcement on March 26, 2025, at Schroders Personal Wealth (SPW), we are keenly observing potential changes that could impact your savings and investments.
Please note that this information is not personal advice, and we do not base our advice on speculation. However, should you have any questions or concerns about your financial plan, you can consult with your Adviser.
So what are the anticipated announcements and their potential implications?
The Spring Statement follows the substantial Autumn Budget of 2024, which introduced significant tax rises and spending plans. The upcoming statement is expected to be less dramatic but still crucial for shaping the economic landscape. The Office for Budget Responsibility (OBR) will present updated economic and fiscal forecasts, which will guide the Chancellor's decisions (1).
One of the primary concerns is whether the Chancellor will introduce new tax rises. Although Reeves has indicated that there won't be tax increases on the scale of the Autumn Budget (2), there is still potential for adjustments to existing tax policies.
The OBR's forecast on inflation and interest rates will be key (3). If inflation is expected to fall below the Monetary Policy Committee’s target, it could lead to lower interest rates, affecting the returns on savings accounts and fixed-income investments, and the amounts paid on mortgages. This could lead to the need to explore alternative investment options that offer higher returns in a low-interest-rate environment.
Although the future remains uncertain, it's important to consider the implications of this forecast when planning your finances. Understanding potential shifts can lead to more informed decisions.
Spending cuts are likely to be the government's primary approach in this statement, rather than increasing taxes, due to the challenging economic climate. These cuts are likely to include significant reductions in welfare spending, efforts to streamline the civil service for increased efficiency, changes to planning regulations to reduce costs, and cuts to various regulations to lessen administrative burdens. These measures are part of a broader strategy to address economic challenges and maintain fiscal discipline (4).
Yet there are other potential policy changes that could impact your finances.
Further freezing of tax allowances: Whilst not a direct tax rise, a potential policy to increase taxes could be introduced if Reeves opts to extend the freeze on income tax thresholds. This approach, often referred to as a stealth tax, gradually increases the tax burden on individuals as their income rises, without changing the tax rates themselves.
The previous Conservative government had frozen these thresholds until April 2028. However, the current Chancellor might consider extending this freeze further to generate approximately £7 billion annually (5). In her first Budget, Reeves chose not to extend the threshold freeze, emphasising that such a move would negatively impact working individuals by reducing their take-home pay. This could also limit individual’s ability to save as they would be left with less disposable income every month,
Individual Savings Accounts (ISAs): Another potential announcement being discussed includes reducing the £20,000 tax-free annual limit for cash ISAs (6). This change aims to encourage more individuals to invest their savings in stocks and shares ISAs. By lowering the limit on cash ISAs, the government hopes to make stocks and shares ISAs more attractive to those who have traditionally relied on cash ISAs, potentially opening up new investment opportunities for a broader range of people.
Inheritance tax relief: The statement could provide the Chancellor with the opportunity to revisit the unpopular inheritance tax hike introduced in the Autumn Budget and scheduled for April 2026. Although this is a huge unknown, if the Chancellor increases the relief limits for business property and agricultural property, it could provide significant savings opportunities for individuals with substantial assets in the business and farming communities.
The upcoming UK Spring Statement 2025 could present both challenges and opportunities. By staying informed and adapting strategies once the announcement has been made, SPW could help you navigate the evolving economic landscape and optimise your financial plans.
Sources:
(1) A look ahead to the 2025 Spring Forecast | Institute for Fiscal Studies
(2) Future tax rises won't be needed, insists Rachel Reeves - BBC News
(5) Spring Statement: What will be in Chancellor Rachel Reeves's plan? - BBC News
(6) Spring Statement: What will be in Chancellor Rachel Reeves's plan? - BBC News
This article is for information purposes only. It is not intended as investment advice.
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