Posted: 24 / 03 / 2025

Article by: David Evans, Head of Private Client
Image: Renan Katayama, CC BY-SA 2.0 https://creativecommons.org/licenses/by-sa/2.0, via Wikimedia Commons

Chancellor Rachel Reeves will deliver the UK’s Spring Statement on 26 March 2025, setting out the latest economic and fiscal outlook.

While this is not expected to be a major tax event — a stance reaffirmed by Reeves when she committed to holding only one significant fiscal event per year — private clients will still be watching closely for any signals of future policy direction.

With the Office for Budget Responsibility (OBR) expected to downgrade growth forecasts, the government faces pressure to balance the books. However, any substantial tax measures are likely to be deferred until the Autumn Budget.

Here’s what private clients should keep in mind ahead of this week’s statement…

A Difficult Economic Backdrop

The UK’s economic outlook remains challenging. The OBR is anticipated to reduce its 2025 growth forecast from 2% to around 1%, driven by higher interest rates and sluggish economic activity. Meanwhile, public borrowing remains elevated, leaving limited room for fiscal manoeuvring.

Rachel Reeves has made it clear that the government will focus on spending restraint rather than tax increases. However, certain targeted measures may still emerge, particularly as the Chancellor seeks to demonstrate fiscal responsibility without stifling growth.

Agricultural and Business Property Relief (APR and BPR)

The government’s proposals to reform or reduce Agricultural Property Relief (APR) and Business Property Relief (BPR), announced in the Autumn Budget 2024, have faced significant opposition from both rural communities and family businesses.

While there is no expectation of further announcements on this in the Spring Statement, the Chancellor may acknowledge the backlash and signal a willingness to consult further. For private clients with family businesses or agricultural holdings, uncertainty remains regarding how these reliefs will be reshaped. Keeping a close eye on any consultation updates will be essential.

Income Tax Thresholds and Fiscal Drag

One of the most effective yet politically subtle ways for the government to raise revenue has been through fiscal drag. By freezing income tax thresholds at £12,570 for the personal allowance and £50,270 for the higher rate threshold until 2028, more taxpayers are pulled into higher bands as wages rise.

The Spring Statement may reaffirm this policy, despite calls to provide relief to middle-income earners. Private clients should factor this ongoing freeze into their tax planning. Gifting strategies, pension contributions, and the use of ISAs remain vital tools for mitigating the impact of fiscal drag.

Pension Tax Relief: A Flat Rate on the Horizon?

Speculation continues over a potential move to introduce a flat rate of tax relief on pension contributions, potentially set at around 25% to 30%. Such a change would reduce the tax advantages currently enjoyed by higher earners, while providing a boost for basic-rate taxpayers.

While the Spring Statement is unlikely to implement this reform, it may include further analysis or a roadmap for consultation. High-net-worth individuals may wish to consider maximising pension contributions under the current system before any reforms are formally introduced.

A Wealth Tax?

Despite periodic speculation, the introduction of a wealth tax remains unlikely. Reeves has consistently downplayed the idea, recognising its political sensitivity and potential impact on investment and capital flight. However, to demonstrate a commitment to tax fairness, we may see further measures targeting the ultra-wealthy.

This could include:

  • Enhanced compliance measures to tackle tax avoidance.
  • Adjustments to non-domicile rules.
  • Increased transparency around offshore assets.

For private clients, ensuring robust tax compliance and transparent wealth structuring will be crucial.

Looking Ahead

While this week’s Spring Statement is expected to be light on headline tax changes, it will provide insight into the government’s longer-term fiscal strategy. Private clients should use this opportunity to review their tax planning strategies and remain prepared for more significant announcements in the Autumn Budget.

As always, early planning and proactive advice will remain the best way to navigate any upcoming changes. If you’d like to discuss your circumstances, please do reach out.