Spring Statement 2025

The Spring Statement highlights:

Government Spending and Reforms:

• Increase in defence spending to 2.5% of GDP by April 2027, aiming for 3% in the next Parliament.
• Reforms to create a more “pro-work” welfare system, projected to save £4.8 billion by 2029/30.
• Announcement of a £3.25 billion Transformation Fund to drive efficiencies across government, including bringing NHS England back into the Department of Health and Social Care.

Housing and Growth Initiatives:

• Additional £2 billion allocated for social and affordable housing for 2026/27, with a goal to build 1.5 million homes in England during this Parliament.
• A £625 million package to enhance skills in the construction sector, aiming to supply 60,000 more skilled workers.

Tax Policies:

• No major changes in tax rates; the basic rate of income tax remains at 20% with the same bands as before.
• The government has committed to capping the main rate of Corporation Tax at 25% for the duration of the Parliament. This is currently the lowest in the G7.
• Introduction of new regulations affecting non-UK domiciled individuals, replacing the remittance basis of taxation, shifting from a domicile-based to a residence-based tax system.
• Capital Gains Tax (CGT) rates for disposals other than residential property and carried interest have increased from 10% to 18% and from 20% to 24%, effective from 30 October 2024. The rates for residential property disposals remain unchanged at 18% and 24%, and those for trustees and personal representatives have risen to 24%.

Digital and Business Enhancements:

• Expansion of the Making Tax Digital (MTD) initiative to include more small businesses and sole traders progressively until 2028.
• Ongoing commitment to full expensing for qualifying capital investments by businesses, with the Annual Investment Allowance maintained at £1 million.

Employment and Wages:

• Increase in National Living Wage and National Minimum Wage effective from 1 April 2025.
• Substantial changes in National Insurance contributions, including an increase in the employer rate from 13.8% to 15% from 6 April 2025.

VAT and Other Tax Changes:

• VAT registration threshold remains at £90,000.
• Removal of VAT exemption for private school fees, applying VAT at the standard rate starting January 2025.

These policies reflect the government’s approach to balancing fiscal responsibility with strategic investments to spur economic growth and improve public services.

For any further assistance on any of the announcements made, or to book a personal consultation, feel free to contact Mark Moore or one of our tax experts.