Spring Statement Summary 2025

Against a backdrop of wider economic and geopolitical pressures, Chancellor of the Exchequer, Rachel Reeves, delivered her Spring Statement on Wednesday 26th March, hoping to breathe renewed life into the economy.

The Chancellor’s announcement was downgraded from a budget to a statement due to her commitment to holding just one major fiscal event per year. This forms part of Ms Reeves’ aim to give businesses and consumers more certainty in order to plan for the future.

However, this year’s Spring Statement wasn’t necessarily less significant than previous budget announcements. Markets and the economy are changeable depending on wider geopolitical affairs.

What did the Chancellor announce in the Spring Statement?

Perhaps one of the biggest takeaways from the Spring Statement was the absence of any changes to personal tax allowances.

Ms Reeves previously committed to not raise taxes in this fiscal event, so any additional rises in Income or Capital Gains Tax (CGT) were thought to be off the table. However, CGT on profits from selling shares was earmarked in the Autumn 2024 budget statement to rise in April 2025, with the basic rate rising from 10% to 18%, and the higher rate increasing from 20% to 24%.

Relating to the economy, the Office for Budget Responsibility (OBR) downgraded its 2025 growth projection from 2% to 1% but also upgraded its predictions for the remaining four years of its projection to 2029.

The Labour Government has made no secret of its plans to change England’s planning system in order to build more houses. The OBR now estimates that these changes will grow the size of the economy by 0.2% by 2030, and 0.4% by 2035.

Defence spending will also increase with the UK and Europe perhaps no longer being able to depend as heavily on the United States and President Donald Trump. Spending on defence, which had been due to rise by £2.9bn next year, will increase by a further £2.2bn. This additional spend will be funded by reducing overseas aid and by Treasury reserves.

Elsewhere, relating to welfare, the Chancellor announced a stricter eligibility test for the personal independence payment (PIP), which is the main disability benefit, from November 2026. Health-related universal credit for new claimants will be cut, although the standard allowance for universal credit is set to rise.

What was the market reaction to the Spring Statement?

Initial reaction to the Chancellor’s Spring Statement was somewhat neutral, as described by Alastair Power, Investment Research Manager, Redmayne Bentley.

“Financial market reactions to the Spring Statement were minimal; government bond yields and equity indices saw limited movements, while sterling traded slightly weaker against the US dollar,” he said.
“The day’s earlier news of inflation easing to 2.8% likely dampened reactions to the 2025 real GDP growth forecast being revised down from 2% in October to 1%. Planning reforms were the shining light however, leading to uplifts in real GDP forecasts for 2026 and beyond.”

He added: “Challenges remain for the Chancellor given limited fiscal headroom and commitment to fiscal rules that adds further uncertainty around policy.”

What did Ms Reeves say about ISAs?

Although the Chancellor didn’t mention ISAs specifically in her statement in Parliament, documents released shortly afterwards said: “The government is looking at options for reforms to Individual Savings Accounts that get the balance right between cash and equities to earn better returns for savers, boost the culture of retail investment, and support the growth mission. Alongside this, the government is working closely with the Financial Conduct Authority to deliver a system of targeted support to give people the confidence to invest.”

This announcement coincided with a Treasury Committee meeting involving Nikhil Rathi, Chief Executive of the Financial Conduct Authority (FCA). Mr Rathi told MPs on Tuesday 25th March that the number of British people owning shares directly was “significantly lower” than in the US, where 38% of consumers hold shares, and in Sweden where the figure is 20%.

Separately, the FCA also announced its new five-year plan in the same week. In it, the financial regulator stated that it would aim to support sustained economic growth by enabling investment and innovation, and help consumers navigate their financial lives by working with industry to increase trust and to ensure that “the right information and support is available for people to take financial decisions.”

In summary

As billed, this was a smaller fiscal event and didn’t feature any tax rises similar to those witnessed in the 2024 Autumn Budget. However, the Chancellor is still facing wider economic pressures and economists have warned that, despite savings being found in this statement, more tax rises may be needed in the forthcoming Autumn Statement if Ms Reeves is to stick to her ironclad fiscal rules.

This communication is for information only and does not constitute financial advice. Investments and income arising from them can fall as well as rise in value.

Please note that tax treatment depends on the specific circumstances of each individual and may be subject to change. The Financial Conduct Authority does not regulate estate planning or tax advice.

The information is based on our understanding of legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change.