Posted: 24 / 03 / 2025

Article by: Sarah Richards, Group Head of Tax
Image: Renan Katayama, CC BY-SA 2.0 https://creativecommons.org/licenses/by-sa/2.0, via Wikimedia Commons

Chancellor Rachel Reeves has been clear: her government is committed to “one major fiscal event a year” to provide stability and certainty on tax and spending. With pledges not to raise income tax rates, employee National Insurance, or VAT, expectations for the Spring Statement remain low in terms of headline-grabbing tax changes.

However, since the 2024 Autumn Budget, economic growth has lagged, government borrowing has risen, and inflation remains stubbornly high. This has many wondering: will the government stick to its word, or could further tax increases or spending cuts be on the horizon?

On 26 March 2025, the Office for Budget Responsibility (OBR) will publish its Economic and Fiscal Forecast. The outlook? Likely gloomy.

Recap from the Autumn Budget

Many of the measures announced last year are due to be implemented from April 2025, with others still going through a consultation process.

See our detailed Budget Breakdown here for a comprehensive overview of the changes.

What Could Change?

Reeves appears to have ruled out significant tax changes, stating “we can’t tax and spend our way to higher living standards and better public services” Instead, she is expected to slash public spending to try to meet her fiscal rules – including a 15% cut to Civil Service running costs and a £3.25bn “spend to save” fund that Government Departments will pitch money saving ideas to. 

However, the increasing pressure on Reeves to drive growth in the economy and reduce government borrowing could lead to a few surprises on the day. In the meantime, we have listed some of the potential areas of change that Reeves could be considering this week or within the 2025 Autumn Budget:

1. Income Tax: Frozen Allowances & Threshold Adjustments

  • Personal allowances are currently frozen until 2028, this could be extended to 2030 in line with the IHT nil rate band freeze. 
  • The 45% additional rate threshold could be reduced from £125,140 to £100,000.

As earnings grow, these measures bring more people into income tax and NICs and pull more taxpayers into higher and additional rates than would have occurred had the thresholds continued to rise with CPI inflation. 

2. Inheritance Tax (IHT) & Pensions

From April 2027, pensions will be subject to IHT at 40% over certain thresholds. The details remain unclear, but this shift has many questioning pension savings as a tax-efficient vehicle going forward triggering discussions around lifetime gifting strategies. 

Potential changes:

  • Extending the 7-year rule for PETs (Potentially Exempt Transfers): Individuals can currently make gifts without an immediate IHT liability arising. They are deemed as PETs and fall out of account for IHT purposes provided the transferor survives seven years. Could these rules change to either extend the seven year window or impose tax on lifetime gifts? 
  • Reforming pension tax relief: Tax relief is currently given on pension contributions at an individual’s marginal rate of tax, provided they are within the available annual allowance. Higher rate relief could be restricted, perhaps by introducing a flat rate of relief of say 30%. Back in 2018, Rachel Reeves said:

“Higher rate pensions contribution reliefs could be restricted, and legislation could require that 20 per cent of all pension contributions be invested in employment-creating opportunities in exchange for the tax reliefs currently available to pension funds.”

Business & Agricultural Property Relief (BPR/APR): From 5 April 2026:

  • The first £1 million of combined agricultural and business property will continue to receive 100% relief, with 50% relief on amounts over £1 million.
  • Business relief for AIM shares and other unlisted shares will reduce to 50%, without access to the £1m allowance.
  • The £1m allowance will effectively be a lifetime cap, covering estates on death, failed gifts in the 7 years before death, and lifetime transfers into trust. Any unused allowance will not be transferable between spouses.

Consultations on APR and BPR run until April 2025, making further changes to this unlikely—at least for now.

3. Non-Doms: The Clock is Ticking

From 6 April 2025, the non-dom regime undergoes a significant change. The new rules impose UK inheritance tax on worldwide assets for long-term residents, not just while they’re in the UK—but for ten years after they leave.

This is particularly concerning for elderly non-doms considering relocation. In 2018, Japan scrapped a similar inheritance tax tail after just one year. Could Reeves follow suit?

4. Employment Taxes: NI & Wages

Previous changes announced in the Autumn Budget 2024 were:

  • Employer NI rises from 13.8% to 15% from 6 April 2025.
  • The threshold at which employer NI is payable drops from £9,100 to £5,000.
  • Employment Allowance set to increase to £10,500.

This has impacted business confidence, with some sectors already seeing recruitment slowdowns and redundancies. Could a U-turn or refinement be considered by Reeves?

5. Corporate Tax: A Missed Opportunity?

  • The Autumn Budget failed to introduce new investment incentives, leaving some questioning whether the UK is doing enough to remain competitive.
  • Consultations on transfer pricing simplification are ongoing. 

6. Carried Interest: A Step Toward Full Reform

The expected CGT increase from 28% to 32% applies from April 2025. However, from April 2026, carried interest moves into the income tax regime—a major shift. 

Draft legislation is awaited, but transitional provisions may soften the impact.

7.  Capital Gains Tax (CGT)

  • CGT Rates increased from 10% to 18% (basic rate) and 20% to 24% (higher rate) from 30 October 2024.
  • Business Asset Disposal Relief (“BADR”) rate increases:
  • 10% to 14% from 6 April 2025.
  • 14% to 19% from 6 April 2026.

Could a reduction to the BADR lifetime threshold (currently £1m) or increase in headline rates be an option? 

8. Other Considerations

  • Wealth Taxes: Reeves has previously rejected the idea of introducing a wealth tax to help balance the budget, believing this would lead to movement of assets offshore rather than increased tax revenues. 
  • HMRC Debt Collection: Reeves could increase the rate of interest and/or penalties applied for the late payment of taxes in addition to the already announced increase in spending on HMRC resources focusing on debt collection/tackling anti-avoidance. 
  • Stamp Duty: The first-time buyer threshold drops from £425,000 to £300,000 on 1 April 2025 – could this threshold reduced even further?
  • Business Rates: Discount for retail, hospitality, and leisure falls from 75% to 40% from 6 April 2025. Could this discount be reduced?
  • Could we see changes to the £20,000 annual ISA limit, particularly the cash portion?
  • A potential end to Digital Services Tax as part of negotiations on USA trade tariffs.

How Sedulo Tax Advisory Can Help

The Spring Statement may not bring seismic tax changes, but its economic impact will be felt across industries. Our experts are here to help businesses and individuals navigate tax planning, mitigate risks, and seize opportunities in this evolving landscape.

Get in touch with myself or your usual tax adviser for tailored advice on these developments and beyond.