Spring Budget 2025 - Summary
On 26th March 2025 the Chancellor, Rachel Reeves delivered the Spring Statement. The Spring Statement did not introduce new tax increases, however, the Chancellor did not rule out potential tax hikes or spending cuts in the autumn to adhere to fiscal rules The key announcements are summarised below.
Taxes
Increasing late payment penalties for VAT taxpayers and income tax Self Assessment taxpayers as they join MTD, from April 2025 onwards. The new rates will be 3% of the tax outstanding where tax is overdue by 15 days, plus 3% where tax is overdue by 30 days, plus 10% per annum where tax is overdue by 31 days or more.
HMRC will re-start “direct recovery” of tax debts owed by individuals and companies who have the ability to pay but choose not to do so.
Increasing the use of upfront payment demands, making more directors personally liable for company taxes, and increasing the number of enforcement sanctions to tackle those using insolvencies to evade tax and write off debts.
From Summer 2025 the High Income Child Benefit Charge (HICBC) can be paid by employed parents through PAYE, removing the need to register for Self Assessment.
HMRC reward scheme for informants will be launched later this year, targeting serious non-compliance in large corporates, wealthy individuals, offshore and avoidance schemes.
Expand MTD for Income Tax to sole traders and landlords with income over £20,000 from April 2028.
Spending
Departmental administrative budget reductions - Government departments will reduce their administrative budgets by 15% by the end of the decade.
£2.2bn on defence spending (from existing reserves)
Overseas aid will be reduced to 0.3% of GPD, saving £2.6bn by 2029/30.
Defence spending will reach 2.5% of GDP by April 2027 with notable investments in technology and innovation.
£2bn investment in social and affordable housing.
Confirmed backing for a third runway at Heathrow.
Planning reforms to help growth.
Construction skills package of £625m to train up to 60,000 more skilled workers. The government will work with Construction Industry Training Board (CITB) to support New Entrants Support Team (NEST) for employers, particularly small businesses, to recruit and retain apprentice and support construction-focused skills boot camp places.
Welfare
Health-related universal credit for new claimants will not rise with inflation until after 2030.
Under-22s will no longer be able to claim the health-related element of universal credit.
Existing claimants health-related payments will be frozen at £97 per week until 2030, with a new top-up payment introduced for those with the most severe conditions.
The standard allowance for universal credit will rise by £14 a week by 2030.
There will be a stricter eligibility test for personal independence payments (Pips), the main disability benefit, from November 2026.
State pension triple lock - 4.1% increase in April 2025.
Pension credit will rise by 4.1%.
Economic Overview
The Office for Budget Responsibility (OBR) has downgraded the UK’s economic growth forecast for 2025 from 2% to 1%.
Inflation is forecast to average 3.2% this year, up from 2.6% previously forecast, before falling back to 2.1% in 2026 and then hitting the government’s 2% target in 2027.
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