What the 2025 Spending Review could mean for your taxes
The Chancellor’s 2025 Spending Review outlines major investments in healthcare, housing, and infrastructure, aiming to boost long-term growth. However, a surprise economic contraction in April has raised concerns about future tax changes.
The Chancellor’s 2025 Spending Review, unveiled this week, outlines a bold vision for the UK’s future—prioritising investment in public services, infrastructure, and national security. While these commitments are designed to stimulate growth and improve quality of life, they also raise important questions about how they will be funded—and what that could mean for taxpayers.
Key highlights from the Review
Chancellor Rachel Reeves announced significant increases in departmental budgets, including:
- £29 billion boost to NHS funding, with a 3% annual increase through to the next election.
- £39 billion for social and affordable housing, the largest investment in five decades.
- £30 billion for nuclear energy, including £14.2 billion for Sizewell C.
- £22 billion for science and technology R&D, with £2 billion earmarked for AI.
- £15 billion for transport infrastructure, including major rail upgrades.
- £52 billion for Scotland, £23 billion for Wales, and £20 billion for Northern Ireland.
These ambitious plans are part of the government’s broader strategy to “renew Britain” by investing in health, security, and economic resilience.
Economic backdrop
However, just a day after the Chancellor’s announcement, the Office for National Statistics reported that the UK economy contracted by 0.3% in April, a sharper decline than the 0.1% expected by economists.
This marks the biggest monthly contraction since October 2023 and follows modest growth in March and February.
The downturn was attributed to falling output in both the services and manufacturing sectors, as well as a record drop in exports to the United States following new tariffs. Chancellor Reeves acknowledged the figures were “clearly disappointing” but reaffirmed her commitment to delivering long-term growth through strategic investment.
What this could mean for taxes
While the government has not yet announced specific tax increases, the scale of spending suggests that future tax policy may need to adapt. Potential implications could include:
- Higher personal or corporate taxes may be introduced to maintain fiscal balance, especially if economic growth does not fully offset the increased expenditure.
- Capital gains and inheritance tax reforms could be revisited as part of broader fiscal tightening.
- Tax reliefs and allowances may be adjusted or frozen to increase revenue without headline rate changes.
What you can do
We understand that headlines about government spending and shrinking GDP can feel unsettling, especially when they hint at possible tax changes. But it’s important to remember: financial planning is a long-term journey, not a reaction to short-term news.
At Schroders Personal Wealth, we’re here to help you stay focused on what really matters—your goals, your future, and the plan to get you there.
So, stay flexible, not fearful. Markets and economies move in cycles. What matters most is having a well-diversified, long-term investment strategy that can weather ups and downs.
Important information
This article is for information purposes only. It is not intended as investment advice.
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