Following Chancellor Rachel Reeves’ impactful Autumn Budget in 2024, anticipation was high around her recent Spring Statement.
So, what’s changed, what’s staying the same, and what does it all mean for your finances?
A Breath of Relief on Personal Taxes
Worried about new tax increases affecting your wallet? Breathe easy! Reeves has stuck to personal tax commitments; no hikes have been announced. Income Tax thresholds and rates are frozen until 2028, meaning you may pay more tax over time due to inflation pushing salaries higher. For now, Capital Gains Tax and Dividend Tax thresholds remain unchanged, ensuring stability for investors and entrepreneurs.
ISAs Stay as They Are For Now
Rumours had suggested that the Cash ISA limit could drop significantly from £20,000 to just £4,000 annually. Fortunately, the limit will stay at £20,000 until 2030, with Junior ISAs remaining at £9,000. However, be alert; ISA reforms aimed at encouraging investment in stocks and shares may still arise later.
A Significant Change for Families: Child Benefit Charge Simplified
A significant announcement, albeit subtly included in the fine print, offers much-needed relief for families affected by the High Income Child Benefit Charge. From this summer, these families can pay through PAYE, eliminating the need for annual self-assessment filings if that is their sole reason for completing a tax return.
Inflation Down, Interest Rates Down, but Not All Good News
Inflation is now better controlled at 2.8% as of February 2025, and the Bank of England’s target of 2% is predicted to be hit by 2027. This is great news for borrowers, as interest rates have started to drop to 4.5%. However, savers might see lower returns on their accounts.
No Changes to Pensions and State Pension
Pension rules remain stable, with the Annual Allowance set at £60,000 and the tax-free withdrawal limit at 25% (up to £268,275). The State Pension continues to follow the triple lock, increasing slightly to £230.25 per week.
Economic Growth Expectations Adjusted Downward
The OBR has reduced its 2025 economic growth forecast from 2% to 1%, citing global uncertainties and domestic factors. In response, Reeves has announced strategic investments in defence and housing aimed at stimulating economic activity.
Government Spending: Leaner and Smarter
To address national debt and improve efficiency, the government is launching a £3.25 billion Transformation Fund to streamline public services using technology and AI. Additionally, a £2 billion increase in funding for social and affordable housing aims to meet ambitious home-building targets.
Autumn 2024 Tax Changes Remain in Force
Remember those unpopular announcements from the Autumn Budget, like higher employer National Insurance contributions, VAT on private school fees, increased Stamp Duty on second homes, and inheritance tax tightening? Unfortunately for many, these policies remain firmly in place.
