2025 Spring Budget: Key Highlights and Implications

2025 Spring Budget: Key Highlights and Implications

The 2025 Spring Budget, presented by Chancellor Rachel Reeves, introduces a range of measures aimed at addressing economic challenges and fostering growth. Here is a summary of the key considerations for individuals and businesses.

Tax Updates

Investment in HMRC Technology: The government is making a significant investment in HMRC’s technology to crack down on tax evasion. While this move aims to enhance compliance and enforcement capabilities, it remains to be seen whether the technology will effectively deter sophisticated tax evaders.

Frozen Thresholds and Allowances: Thresholds and allowances remain frozen, maintaining the tax burden at a 70-year high of 37.7% of GDP. This decision continues to impact both individuals and businesses, as the real value of allowances diminishes over time.

High Income Child Benefit Charge (HICBC): From Summer 2025, employed parents can pay the HICBC through PAYE, eliminating the need to register for Self-Assessment. While this change simplifies the process for many families, it may not address the underlying complexities of the benefit system.

Individual Savings Accounts (ISAs)
The government is conducting an ongoing review of ISA reforms to balance investments between cash and equities. Despite rumours of a significant reduction in the annual investment limit, it remains at £20,000 for now.

Government Spending

• Inflation Projections
  Inflation is projected to fall to 2% by 2027, with the Office for Budget Responsibility (OBR) expecting it to average 3.2% this year. While this forecast provides some optimism, the accuracy of such long-term projections leaves room for doubt.
• Government Transformation Fund
  A £3.25 billion fund has been established to reduce government running costs, including voluntary exit schemes from the civil service. This initiative aims to streamline operations and improve efficiency.
• Defence Spending
  An allocation of £2.2 billion from existing reserves will bolster defence spending, with a commitment to reach 2.5% of GDP by April 2027. Investments in drones and AI, along with a £400 million UK defence innovation fund, highlight the focus on modernising the military.
• Overseas Aid
  Overseas aid will be reduced to 0.3% of GDP, saving £2.6 billion by 2029/30. This decision reflects a shift in priorities towards domestic spending, bringing criticism from some quarters on the impact on the UK’s global standing and humanitarian commitments.
• Social and Affordable Housing
  A £2 billion investment in social and affordable housing aims to address housing shortages and improve living conditions.
• Welfare Budget
  The welfare budget will see a net cut of £3.4 billion, impacting various social support programmes..
• State Pension and Pension Credit
  The state pension triple lock will see a 4.1% increase in April 2025, with pension credit also rising by 4.1%. These adjustments aim to support retirees facing cost-of-living pressures, but questions remain about the long-term sustainability of the triple lock.
• Infrastructure Projects
  Confirmed backing for a third runway at Heathrow and the regeneration of Portsmouth naval base are key infrastructure projects that will drive economic growth and job creation.
• Planning Reforms
  Planning reforms are set to stimulate growth by making it easier to undertake development projects. While this is a positive move, the effectiveness of these reforms in overcoming bureaucratic hurdles remains to be seen.
• Construction Workforce Training
  A £600 million investment will be made to train 60,000 new construction workers, addressing skills shortages in the industry. However, the success of this initiative depends on the quality and accessibility of the training programmes.

This summary highlights the key aspects of the 2025 Spring Budget, with a focus on tax and finance considerations for both individuals and businesses. While the measures outlined have the potential to drive growth and stability, there are valid concerns about their implementation and long-term impact. For more detailed advice tailored to your specific circumstances, please don’t hesitate to contact us.

Kyle Toby

Tax, Senior Manager