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There may have been no further tax increases announced by Chancellor Rachel Reeves in her Spring Statement, but this is cold comfort for those set to be impacted by a raft of hikes happening this April.
The Spring Statement typically focuses on indicators of how the economy has been doing, such as GDP growth, inflation, tax, Government spending and borrowing, rather than new policy announcements. These tend to be reserved for the Autumn Budget, and you can read about the measures that were announced then in our article Autumn Budget 2024: what it means for you.
Most people will end up worse off this year due to the freezing of income tax allowances and what is known as ‘fiscal drag’. Fiscal drag is the process by which people end up paying more tax when tax rates and thresholds remain static, as they earn more and their assets rise in value. Adding to financial pressures are steeper council tax and energy bills from April.
Here’s our rundown of some of the main Spring Statement announcements, so you can see how they’re likely to affect you.
Revised economic forecasts
The Office for Budget Responsibility (OBR) revised down its growth projections from 2% in the autumn to 1% today, reflecting global uncertainty and steeper government borrowing costs, and reduced fiscal headroom from the October Budget’s £9.9 billion surplus.
The Chancellor said she would work closely with the Bank of England to ensure that inflation reaches its 2% target by 2027. Inflation slowed to 2.8% in the 12 months to February, according to Office for National Statistics data, down from 3% in January. Find out more in our article Inflation eases to 2.8%.
Welfare cuts
The Chancellor stated prior to the Budget that the current welfare regime “isn’t working for anyone,” and that changes are necessary to ensure economic stability.
Reforms already announced by Work and Pensions Secretary Liz Kendall include tightening of Personal Independence Payment (PIP) eligibility criteria and a review of the assessment process. PIP was introduced in 2013 to gradually replace the Disability Living Allowance (DLA) for people aged between 16 and the State Pension age who have long-term physical or mental health conditions or disabilities, which means they need additional care or mobility assistance.
However, changes to PIP have been widely criticised amid fears that they will see some of the most vulnerable members of society pushed into debt. According to the Resolution Foundation, the proposed changes to PIP could lead to up to 1.2m people losing as much as £6,300 a year by 2029-30.
The Chancellor announced that the Universal Credit standard allowance will increase from £92 a week in the 2025/26 tax year to £106 a week by 2029/30. However, the Universal Credit health element will be cut by 50% and then frozen for new claimants.
Pensions and pensioner benefits
The main pensioner benefits were spared by the Chancellor, much to the relief of those on fixed incomes. Mike Ambery, Retirement Savings Director at Standard Life, part of Phoenix Group said: “At an annual cost of nearly £140bn the state pension would have been an attractive but politically fraught area for cost saving, particularly given the government’s manifesto commitment to the triple lock.
“With March’s average earnings figure coming in at 5.8% including bonuses, there’s potential for a significant rise to the state pension in 2026. The sums of money involved are sure to make the state pension a focus of debate but for now at least it is business as usual.”
The state pension will increase by 4.1% in the 2025/26 tax year, from £221.20 a week to £230.30, representing an annual increase of £473, although the amount you’ll personally receive will be based on your National Insurance Contribution record.
The full basic State Pension is currently £169.50 a week, and this will increase to £176.45 at the start of the new tax year on April 6, adding £361 onto annual payments. Learn more in our article What will the State Pension be in 2025?
Unlike in the Autumn Budget, there were no big announcements affecting workplace or personal pensions. The big pensions news then was the Chancellor’s proposal that from 2027 pensions will no longer be able to be passed on free of inheritance tax. You can find out more about these changes and how they might affect you in our article Budget 2024 pension changes.
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Getting people back to work
The Chancellor pledged £1bn to support people into employment, as well as a further £400m to support Job Centres.
However, the hike in National Insurance for employers, which comes into effect on April 6, is set to add more pressure onto businesses, who may be forced to lay off employees rather than take on more staff.
Lisa Picardo, Chief Business Officer at PensionBee said: “The higher cost of doing business may increase unemployment rates, will inevitably impact wage growth, and may also lead to reduced employer pension contributions.”
If you’re looking for a full or part-time job, a career change after 50, or to find your purpose post-retirement, we have lots of job and volunteering roles available on our site with age-diverse employers and organisations.
ISAs unchanged – for now
The current £20,000 ISA allowance is unchanged for now, despite widespread speculation that the Chancellor was set to introduce a £4,000 annual cap on cash ISA contributions. An ISA is essentially a tax-efficient wrapper that you can hold savings or investments in, so your returns are shielded from the taxman.
Any part of your allowance you haven’t used by the end of the tax year cannot get carried over into the next tax year, so you’ll need to get your skates on if you want to make the most of this year’s allowance. You can find the market-leading cash ISA rates currently available in our article Best cash ISA rates – which cash ISAs pay the most interest?
However, the Spring Statement document does confirm that the government is looking at ISA reform, so we could see changes to ISAs announced in the forthcoming Autumn Budget.
Rachael Griffin, tax and financial planning expert at Quilter said: “Making stocks and shares ISAs more attractive than their cash counterpart could help more people grow their wealth over the long term and direct more capital toward productive investment, which is clearly a goal for this government.
“Many Britons hold excessive cash generating low returns, rather than investing in growth assets that could better secure their financial future and help the UK economy. But any reforms must be handled with care. Cash ISAs remain popular for a reason — they offer security, accessibility and certainty, particularly for older savers or those with shorter-term goals. The key will be finding the right balance and encouraging investment without alienating those who rely on safer options.”
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