What can we expect from the Spring Statement?

Important information - the value of investments and the income from them can go down as well as up, so you may get back less than you invest.

Speculation is rising on whether the Chancellor’s upcoming Spring Statement will contain spending cuts, tax rises — or a combination of both. 

Rumours aside, what we do know is that the Spring Statement will also contain the latest independent forecasts, offering the most up-to-date evaluation of the UK’s current economic situation.

Many expect this situation to have worsened since Rachel Reeves delivered her Autumn Budget, thanks to ongoing political and economic uncertainties and sluggish UK growth. If this is the case, the Spring Statement gives the Chancellor the opportunity to make further adjustments to the public finances to balance the books and ensure she is not breaking her own fiscal rules on debt and borrowing.

The Autumn Budget raised £40bn — the biggest tax-raising Budget for over 30 years. While the Spring Statement is not expected to be as far-reaching, it could still have an impact on many people’s finances. Below we answer key questions about this fiscal event.

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When is the Spring Statement?

Chancellor Rachel Reeves will present this statement to Parliament on Wednesday, 26 March. This will include the latest economic forecasts from the independent Office for Budget Responsibility (OBR), which will take into account changes proposed by the Chancellor in both the previous Budget and this Statement.

How does a Spring Statement differ from a Budget or ‘mini’ Budget?

The Chancellor of the Exchequer usually updates Parliament twice a year on the state of the economy. A full Budget is held in autumn, outlining tax and spending plans for the year ahead.

The Spring Statement was initially meant to provide an update on the economic and fiscal outlook, with an updated analysis from the OBR. Typically, it does not involve major tax or spending changes — but in recent years, Chancellors have used this as an opportunity to announce policy changes, often in response to a change in underlying economic conditions. These beefed-up statements have sometimes also been unofficially known as ‘mini’ Budgets.

There have also been emergency Budgets outside the normal cycle, usually due to an election or another significant economic event. The most notorious of these recently was, of course, the so-called ‘mini’ Budget delivered by then-Chancellor Kwasi Kwarteng in September 2022, which precipitated the resignation of Liz Truss as Prime Minister.

Why is Reeves looking for more money after such a tax-raising Budget?

The economic climate has been much weaker than expected. In the UK, inflation started to rise at the start of the year, which has impacted bond yields, increasing government borrowing costs. At the same time, the government has pledged to increase spending on defense to help Ukraine. Meanwhile, President Trump’s tariffs have sparked fears of a trade war, creating widespread market volatility.

The Autumn Budget raised £40bn — of which £25bn came from the hike in employers’ National Insurance rates. But Reeves only built in a narrow £9.9bn headroom into her financial plans. The worsening economic climate is likely to have eaten into these reserves, meaning further action may be needed, otherwise Reeves risks breaking her key fiscal rule of not borrowing to fund day-to-day public spending — a rule she has previously described as “non-negotiable”.

What changes might we see?

It is widely expected that Rachel Reeves will look to make significant cuts to government spending. Exact details are being kept under wraps, but media reports and government briefings certainly suggest deep cuts will be made to the welfare budget, particularly around health and disability benefits.

If this isn’t enough to plug the gap, Reeves may also look at additional ways to raise revenue through the tax system. Options for manoeuvre may be limited given the government’s pre-election pledge not to raise Income Tax, VAT or National Insurance — for employees at least.

One persistent rumour is that the government will freeze Income Tax thresholds beyond 2028. This will mean that more people get dragged into higher tax brackets over time as wages rise, due to an effect known as ‘fiscal drag’. This is likely to provide a significant boost to government finances over the longer term — particularly as these thresholds have now been frozen since 2022 — but does not raise capital instantly.

There is also some speculation that Reeves may look again at Inheritance Tax (IHT). In the Autumn Budget, she announced plans to include pensions within the IHT net. Many have suggested she could reduce the various ‘gift’ allowances in a bid to raise revenue. For example, people can currently give away up to £3,000 a year to an individual without this being counted as part of their estate for inheritance tax purposes. Larger gifts are also potentially exempt from IHT, provided the donor lives for a further seven years. Reeves may look to remove or reduce this £3,000 small gift allowance, or require people to live for a further 10 or 15 years before larger gifts become fully exempt from IHT.

Currently, IHT is charged on estates worth over £325,000 at 40%, although no IHT is levied on assets passed between spouses (or civil partners), and there are additional allowances for those passing on a family home to children.

• Read: 5 tax hacks: how to make financial gifts without a big tax bill

What about ISA allowances?

There had been speculation that Reeves might make changes to the amount people can save tax-free through Individual Savings Accounts (ISAs). But the government has confirmed there will be no changes to ISAs in the Statement, although Treasury officials have said the Chancellor is still considering future reforms. These are likely to look at how ISAs could be restructured to encourage greater investment into the stock market and wider UK economy, rather than funds simply sitting in cash accounts.

Currently, everyone has a £20,000 limit, which can be saved either in a Cash ISA, a Stocks and Shares ISA, or a combination of the two, although this suggests this could be changed at a later Budget.

• Open a Stocks and Shares ISA

Is there any good news expected?

The Chancellor has made it clear she wants to drive investment into the UK economy. This has led to suggestions she may seek to revise the 0.5% stamp duty paid when buying UK shares — seen by some as an obvious disincentive to investing. However, given the tricky financial situation the Chancellor finds herself in, it may be that this is parked for another day.

• Read: How might the government change Cash ISAs? 
• Read: What is my ‘nil-rate band’ for Inheritance Tax?
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