Spring Statement 2025: What It Means for Your Money

What Is the Spring Statement?

The Spring Statement is the Chancellor's mid-year fiscal update, typically held in March. It is not a full Budget — it does not normally set tax rates or introduce major spending changes. However, the Office for Budget Responsibility (OBR) publishes updated economic and fiscal forecasts alongside it, and Chancellors sometimes use the occasion to announce policy adjustments. The 2025 Spring Statement, delivered by Rachel Reeves on 26 March 2025, was more consequential than usual: the OBR more than halved its UK growth forecast for 2025 (from 2.0% to 1.0%), and the government announced £4.8 billion of welfare spending cuts to maintain its fiscal rules. For most people, the day-to-day impact is indirect — but the welfare reforms affect millions of households directly.

"The Spring Statement is the Chancellor's mid-year fiscal update, typically held in March"

OBR Growth Forecast Slashed — What It Means

The OBR cut its 2025 UK GDP growth forecast from 2.0% to 1.0%, citing global trade uncertainty (particularly US tariff policy) and weaker domestic demand. The longer-run forecast was also revised down. For households, slower growth typically means: slower real wage growth; tighter public finances, constraining future government spending; and potential for interest rates to stay higher for longer if the Bank of England is managing conflicting signals. The OBR forecast does not directly change your tax position in 2025/26 — but it is a useful backdrop for reviewing your own financial resilience. If your finances are stretched, a period of slower economic growth makes building an emergency fund more important, not less.

Welfare and Disability Benefit Reforms

The most direct financial impact of the Spring Statement falls on disability and incapacity benefit claimants. The government announced cuts worth £4.8 billion by 2029/30, with the key changes being: PIP (Personal Independence Payment) — the standard daily living component will be tightened, with new claimants needing to score at least 4 points on a single daily living activity from November 2026 (rather than accumulating points across multiple activities). Around 800,000 existing claimants could lose PIP entirely or see payments reduced. Universal Credit health element — the LCWRA (Limited Capability for Work-Related Activity) addition for new claimants will be frozen at £97/week from 2025/26 rather than rising. Existing claimants retain current entitlements. If you currently receive PIP or are about to apply, check the DWP's Pathways to Work consultation — the reforms are subject to consultation and parliamentary scrutiny before taking effect.

Income Tax, NI and Thresholds — No Changes for 2025/26

The Spring Statement confirmed no changes to income tax rates or National Insurance contributions for 2025/26. The rates and thresholds set at the October 2024 Autumn Budget remain in force: Personal Allowance: £12,570 (frozen until 2028). Basic rate (20%): £12,571–£50,270. Higher rate (40%): £50,271–£125,140. Additional rate (45%): above £125,140. Employees pay NI at 8% on earnings between £12,570 and £50,270, and 2% above. The continued freeze of the Personal Allowance and higher rate threshold — unchanged since 2021 — means fiscal drag continues to pull more taxpayers into higher bands as wages rise. The OBR estimates this will bring an additional 4 million people into income tax and push 3 million into the higher rate band by 2028.

"The Spring Statement confirmed no changes to income tax rates or National Insurance contributions for 2025/26"

Defence Spending Rise and What It Means for Public Services

The government confirmed defence spending will rise to 2.5% of GDP by 2027, partly funded by the welfare cuts and day-to-day departmental savings. This means real-terms cuts for some non-protected departmental budgets. For households, the most relevant consequence is in public services: NHS waiting times, social care provision, and local authority services all face tighter funding. If you are planning any financial decisions that depend on public services — such as care costs for elderly relatives or NHS provision versus private health insurance — the spending environment argues for reviewing your assumptions about service availability.

Your 2025/26 Allowances Were NOT Changed

For clarity, the following were NOT changed by the Spring Statement and remain as confirmed for 2025/26: ISA allowance: £20,000/year. Capital Gains Tax rates: 18% (basic rate) and 24% (higher rate). Dividend allowance: £500. Pension annual allowance: £60,000. Inheritance Tax nil-rate band: £325,000 (frozen until 2030). Starter rate for savings: 0% on up to £5,000 of savings interest. Personal Savings Allowance: £1,000 (basic rate taxpayer) / £500 (higher rate). All of these were confirmed at the October 2024 Budget and are unchanged. The tax year closes on 5 April 2026 — you still have time to use your full ISA and pension allowances.

Five Things to Do Now

1. If you claim PIP or are about to claim — read the DWP consultation and consider getting advice from Citizens Advice or Scope before any changes take effect (November 2026 at earliest). 2. Check your tax code using our Tax Code Checker — frozen thresholds and any change in circumstances can mean you are overpaying tax. 3. If your earnings are near the £50,270 higher rate threshold, consider additional pension contributions to keep income in the basic rate band — particularly valuable under ongoing fiscal drag. 4. Build or maintain an emergency fund — slower growth and welfare uncertainty argue for greater personal financial resilience. Aim for 3–6 months of essential spending in accessible savings. 5. Use up your 2025/26 ISA allowance before 5 April 2026 — no announcement has reduced it, and it does not carry over.

"Check your tax code using our Tax Code Checker — frozen thresholds and any change in circumstances can mean you are overpaying tax"