While the originally planned Spring Forecast was upgraded to a Spring Statement, there were no tax increases announced on Wednesday 26th March – but is this simply a deferred burden?
The Chancellor of the Exchequer’s update on the government’s financial plans included several consultations on matters such as R&D tax relief and HMRC penalties, but no tax changes.
So, what did the Spring Statement reveal, and what might this mean for the next Budget?
The ‘Stability Rule’
Before she became the Chancellor, Rachel Reeves set a public finance goal that was dubbed the ‘Stability Rule’ – requiring the government to match day-to-day expenditure with revenue.
When Reeves shared her Autumn Budget in October 2024, the Office for Budget Responsibility (OBR) projected the government would meet the Stability Rule with a spare £9.9 billion.
However, the OBR recalculated this margin ahead of the Spring Statement and found that the government would actually fail to meet the Rule by £4.1 billion – a reversal of £14 billion.
Considering the £9.9 billion margin proved to be inadequate the first time, it’s a surprise that the new figure in the Spring Statement is the same – despite the raft of welfare spending cuts.
This has prompted speculation that the measures announced in the Spring Statement are designed to fit the Stability Rule rather than to help the British people earn and save money.
Autumn 2025 Expectations
The issue with maintaining the same margin is that when the OBR publishes its next assessment this autumn, it’s likely the Stability Rule will be missed again. In this case, the Chancellor will probably have to increase taxes to recover instead of making further cuts to spending.
There are already signs of preparation for this in the Spring Statement, which suggests a review of the balance of cash and shares in Individual Savings Accounts (ISAs).
If the government lowers the £20,000 annual tax-free investment limit for cash ISAs, this would produce extra revenue for the government due to the reduction in tax relief.
On top of ongoing ‘stealth taxes’ from frozen thresholds and increased National Insurance Contributions (NICs) already underway, new tax rises are likely to be unveiled in the next Budget in Autumn 2025 – so the Spring Statement isn’t much more than a holding exercise.
Time for Tax Planning
As it did in summer 2024 ahead of the new Labour government’s first Autumn Budget, it’s likely that speculation about incoming tax increases will escalate over the next few months.
In the meantime, as the 2025–2026 tax year has just begun, it would be smart to focus on your own financial planning. At gbac, we’re here to help with tax management services.
Our accountants in Barnsley can support you in improving your tax efficiency while complying with HMRC rules. Simply call 01226 298 298 or email info@gbac.co.uk to get started.