Tax
As predicted, there were no new tax measures announced in the Spring Statement. The Government’s publication includes more detail on reform of the administration of the tax system, in particular, a commitment to fund HMRC to prosecute more tax fraudsters and pay rewards for informants. The aim is to raise a further £1bn in tax.
Otherwise, the tax story is all about automation, with the rollout of Making Tax Digital requiring digital input on a quarterly basis from certain sole traders and landlords from 2026.
In terms of future fiscal events we’re told that there will be a Spending Review in June and a Budget in the autumn. Whilst the Spending Review, like this statement, should not contain any detailed tax changes, it should give an indication of how the figures and forecasts set out in the Spring Statement measure up to reality.
Spending
Rachel Reeves reined in her plans for a loosening of the public purse in 2029/30, but only by a little less than £10bn – not a figure to sniff at, but small change in the grand scheme of things, and only a part-undoing of the spree she’d pencilled in last October.
She also talked of an ‘ambition’ to increase defence spending, but nothing on the scale of her German counterpart: tanks, destroyers, fighters and drones are made of firmer stuff.
The Chancellor was always unlikely to announce much more than a token gesture to keep Britain’s creditors at ease. After all, government borrowing costs have crept up to uncomfortably high levels since the Budget, raising the floor beneath Rachel Reeves to the point where she ran out of fiscal headroom. This has not been entirely her fault, but was always a possibility in a world still suffering from lingering inflation in the aftermath of lockdown and other pandemic policies.
Outlook
As you may well have already seen, the Office for Budgetary Responsibility (OBR) has halved its forecast for UK GDP growth for the remainder of the year. On a per-capita basis, things look even less rosy, with real earnings set to flat-line for the coming few years. Hikes to employer contributions to National Insurance – a tax on hiring – seem to be coming home to roost.
It should be said that the OBR has form for being rather gloomy, and its prognostications should be taken with a cellar of salt. For some time now, its dingy outlooks have oppressed successive Chancellors, with economic management in hock to prophecy.
While some commentators seem to think that further tax rises are on the cards, there have been signs lately of the Government acknowledging just how unproductive and historically bloated the public sector is. While true austerity or DOGE-style chainsaw economics seems unlikely, as it would require deeply unpopular reform to ballooning welfare spending, we should not rule out a pruning of the state.
Summary
In summary, the Spring Statement from Reeves may have been upbeat, but the figures looked tight, with savings almost exactly matching the £9bn of lost headroom from last autumn. That reality check may set the tone for a summer of speculation on the contents of an autumn Budget.
This article was written by William Morris, CFA, Head of Investments and Clare Munro, Senior Tax Adviser.
Important information
This article does not constitute advice. Tax laws are subject to change and taxation will vary depending on individual circumstances.