The Spring Statement is not a big event like the Budget – but it can influence future tax and spending decisions
Rachel Reeves has delivered her Spring Statement to Parliament where she insisted Labour has the “right economic plan for the country“ and claimed people will be £1,000 better off a year.
The Spring Statement is not a big event like the Budget, so there were no major tax or policy changes announced today. The Chancellor had previously committed to only one major fiscal event a year.
But the Spring Statement can influence future tax and spending decisions, as the Office for Budget Responsibility (OBR) releases its latest economic forecast, which basically gives a picture of how the nation’s finances are doing.
Let’s also not forget that there are previously announced changes coming that affect your pension, tax and savings that have yet to come into force.
Follow our Spring Statement live blog for the latest updates
What it means… for your taxes
No changes to your personal taxes were announced in the Spring Statement today – but millions of people are already set to pay more in tax over the next few years anyway, due to measures that were announced in the Autumn Budget last year.
In her Budget, the Chancellor announced she was extending the freeze on tax thresholds until April 2031. This is known as fiscal drag, as more of your income is taxed at higher rates as wages rise.
The personal allowance, which is how much you can earn before you start to pay tax, is currently set at £12,570. You pay the 20% basic rate of tax on earnings above £12,570, then the 40% higher rate of tax on earnings above £50,270.
The 45% additional rate applies against earnings above £125,140.
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What it means… for your pension
Pensions were left untouched in the Spring Statement – however, there are some big changes coming that have previously been announced by the Government.
The state pension is rising from 4.8% from April, in line with the triple lock. It means the full new state pension will increase from £230.25 a week to £241.30 a week.
But in her Budget last year, Ms Reeves announced a new £2,000 yearly cap on how much money can save into your pension through salary sacrifice schemes.
The new cap will come into place from April 2029 and it means pension contributions from salary sacrifice schemes that go above the £2,000 yearly threshold will no longer be exempt from National Insurance.
Another change to be aware of, is that from April 2027, inherited pensions will be subject to Inheritance Tax and included in the ‘estate’ – which also includes property, possessions and money – of someone who has died.
What it means… for your savings
The Chancellor did not unveil any new changes that will affect your savings in her Spring Statement. However, in her Budget last year, it was confirmed that the annual cash ISA limit is being cut for under-65s from £20,000 to £12,000 from April 2027.
There will still be an overall £20,000 ISA limit, so it means you could save £12,000 into a cash ISA and £8,000 into a stocks and shares ISA. Over-65s will still be able to put their whole £20,000 allowance into a cash ISA.
An ISA is a type of account where any savings interest you earn is always tax-free. It was also previously confirmed that the rate of tax paid on savings interest for other accounts is going up from April 2027.
If you’re a basic-rate taxpayer, you can earn £1,000 in savings interest before you start to pay tax. You pay 20% tax on anything earned in savings interest above this threshold – but this will rise to 22% from April 2027.
Higher-rate taxpayers pay 40% tax when they earn more than £500 in savings interest a year. This will go up to 42%. Additional rate taxpayers have to pay 45% tax on all their savings interest, as they don’t get any tax-free allowance. This will rise to 47% tax.
What it means… if you claim benefits
No benefit updates were announced in the Spring Statement today – but there are already big changes in the works that have been previously announced.
It was confirmed in the Budget that the two-child benefit cap is being axed from this April. The two-child benefit cap means low-income families cannot claim further means-tested benefits when they have a third or subsequent child born after April 6, 2017.
It has also already been previously confirmed that benefit payments including Universal Credit will also rise from this April.
Most welfare payments normally increase every April in line with the previous September rate of inflation – however, the Universal Credit standard allowance will go up by an even bigger amount.
The standard allowance will increase from £400.14 to £424.90 a month for a single person aged 25 and over, and from £628.10 to £666.97 a month for couples.
The Motability scheme is also being reformed to remove luxury vehicles. Motability is a scheme that allows people with a qualifying disability benefit to exchange their allowance for a leased vehicle.
What it means… for drivers
Ms Reeves did not announce any updates to fuel duty today in her Spring Statement. Fuel duty is a tax on road fuels, heating oils, and other fuels and it impacts the pump price you pay for petrol and diesel.
In her Budget, the Chancellor confirmed the 5p per litre cut in fuel duty is being extended until the end of August 2026 – after this, rates will then gradually return to March 2022 levels by March 2027.
It means prices at the pump will likely go up when the 5p cut is tapered away. It was also previously announced that drivers of battery electric cars will be hit by a 3p per mile tax from April 2028, while drivers of plug-in hybrids will be charged 1.5p per mile.
In the more immediate future, concerns over rising petrol prices have been raised this week after the cost of oil jumped following the conflict in the Middle East.
What it means… for smokers and drinkers
The price of smoking and drinking won’t get any more expensive in the immediate aftermath of the Spring Statement. This is because the Chancellor did not announce any further changes to tobacco or alcohol duty.
But tobacco duty, which is passed down into what you pay in the shop, already rose by RPI inflation plus two percentage points after the last Budget.
Alcohol duty also rose in line with RPI inflation last month.
What it means… for first-time buyers
Getting on the property ladder is no easy feat – and the Chancellor did not announce any changes to make it any easier in her Spring Statement.
In her Budget, the Chancellor confirmed plans to reform the Lifetime ISA. The Lifetime ISA is a type of savings account where the government gives you a 25% bonus on your savings.
You can save up to £4,000 each tax year into a Lifetime ISA – so the maximum bonus you can get each year is £1,000.
But you can only use this product for your first home or retirement. If you access your funds for any other reason, you face a a 25% withdrawal penalty which not only wipes out the bonus, but also part of your original savings.
You can only use the Lifetime ISA if you’re buying a home worth under £450,000.