The Spring Statement Explained

Economic outlook, fiscal stability and planning reforms

On 26 March 2025, Chancellor Rachel Reeves delivered her Spring Statement in the House of Commons. While there were no major tax policy changes announced, the speech provided important clarifications on future tax compliance measures, spending priorities, and economic forecasts. Here’s what you need to know.

Key Tax and Compliance Updates

 Although headline tax rates and allowances remain unchanged, there were some notable updates on tax compliance and reporting requirements:

• Stricter VAT and Making Tax Digital (MTD) Penalties: The government is increasing penalties for late VAT payments and non-compliance with MTD for Income Tax.
• Future MTD Record-Keeping Changes: Draft legislation is in the works that could alter how businesses and individuals must maintain their tax records under MTD.
• Tax Deadline Alignment Consultation: HMRC is exploring whether tax deadlines for Income Tax and Corporation Tax should be brought into closer alignment for ease of compliance.

While these measures don’t take immediate effect, they indicate a clear direction toward tighter enforcement and digitalisation of the tax system.

 

Public Spending and Fiscal Outlook

 A recurring theme throughout the Statement was the government’s commitment to maintaining fiscal discipline while prioritising long-term economic growth.

• Balancing the Budget: The government aims to balance its books by 2029/30, despite a downgraded growth forecast in the near term. Careful management of public spending and increased tax compliance measures are expected to generate a £9.9bn surplus by that time.
• Public Sector Efficiencies: A push for cost-cutting measures includes eliminating thousands of government credit cards and streamlining operational expenses.

 

Defence and National Security Investment

 With global tensions high, the government pledged an additional £2.2bn for the Ministry of Defence in 2025/26. This funding is intended to strengthen military readiness, accelerate new technologies, and support strategic global alliances. The hope is that investment in high-tech defence sectors will also contribute to economic growth.

 

Housing and Planning Reforms

 A major focus of the Statement was boosting housebuilding to levels not seen in over 40 years. According to the Office for Budget Responsibility (OBR), proposed planning reforms could significantly boost GDP over the next decade. This aligns with the government’s ambition to stimulate economic growth by increasing housing supply and modernising infrastructure.

 

Economic Growth Forecasts

 The OBR revised its 2025 growth projection downwards from 2% to 1%, reflecting near-term economic challenges. However, it also provided a more optimistic long-term outlook, with expectations of gradual growth improvements through 2029.

 

What to Expect Next: Autumn Budget 2025

 One of the biggest takeaways from the Spring Statement is that major tax decisions will likely be reserved for the Autumn Budget, the government’s single annual fiscal event. With ongoing economic uncertainties, here are some potential policy shifts to watch for:

• Extension of Frozen Tax Thresholds: Current freezes on income tax, national insurance, and inheritance tax thresholds may continue, pulling more people into higher tax bands.
• Possible Tax Rate Increases: If growth remains sluggish or borrowing costs rise, the government may explore raising the higher rate of income tax or specific duties.
• New Targeted Levies: There could be sector-specific taxes, similar to previous health and social care levies, to address funding gaps in priority areas.
• Business Tax Changes: Corporate tax structures and capital allowances may be reviewed to encourage investment while ensuring adequate tax revenue.

 

Next Steps: The Spending Review

Before the Autumn Budget, the next key date to watch is 11 June 2025, when the government will release its Spending Review. This will outline departmental budgets and indicate whether further structural changes are on the horizon.

While this Spring Statement did not introduce immediate tax changes, it provided insight into the government’s economic priorities and long-term plans. With a focus on fiscal discipline, tax compliance, and strategic investment, businesses and individuals should prepare for potential policy shifts in the coming months.

Stay informed and proactive, if you have concerns about how these developments might impact you or your business, now is the time to seek professional advice.

If you want to talk to someone about subjects raised in the Spring Statement, or anything else to do with your finances, talk to us here at Dunkley’s Accountants. Contact us on 01454 619900 or click here.