The Spring Statement: What does it mean for my finances?

The Chancellor had already ruled out any more tax increases in the Spring Statement after announcing a raft of revenue raising measures in the Autumn Budget.

As such, there was little in the Statement that will directly impact on doctors’, dentists’ and teachers’ finances.

However, there are a number of policies announced in the last Budget that are set to come into play in the next week that should cause pause for thought.

Taxes

Labour has left the previous Government’s freeze on Income Tax thresholds untouched until April 2028, meaning more professionals will inevitably be pushed into higher tax bands over time.

While the Chancellor has signalled that these thresholds will start to rise again from 2028/29, more experienced doctors, dentists and teachers will be hit in the meantime, which could be an incentive to revisit their retirement plans.

The Chancellor also chose to freeze the Inheritance Tax (IHT) threshold at £325,000 until 2030 and from April 2027, inherited pensions will no longer be exempt from the tax from April 2027.

It means professional advice will be important to ensure financial planning is as tax efficient as possible in this complex area of tax law, which includes numerous allowances and exemptions.

Alec Collie, Head of Medical at Wesleyan Financial Services, said: "There was little in the way of good news in today’s Spring Statement.

"While there will have been relief that we didn’t hear anything new on Inheritance Tax, there’s already growing concern around the plans to include inherited pensions in IHT’s scope from 2027.

"It’s not yet clear whether this will affect public sector pensions, but I do know of many who are using private pensions to avoid the 60% ‘tax trap’ or to maintain their child benefit entitlement.

"The IHT proposals are making them feel like they’re going to lose out whatever they do. There’s a real risk that this discourages saving for retirement, or forces more to leave their profession and start drawing down on their pension so they minimise the potential size of their estate."

The Financial Conduct Authority (FCA) does not regulate Inheritance Tax Planning and Trusts.

Pensions, savings and investments

There had been rumours that the Chancellor had been looking at Individual Savings Account (ISA) allowances, with speculation that annual limit for Cash ISAs would be cut from £20,000 to as low as £4,000.

The aim was to drive savers towards stocks and shares ISAs and encourage a culture of retail investing.

But, while this announcement is still apparently on the cards, it now seems to have been kicked down the road.

Nick Henshaw, Head of Intermediaries at Wesleyan Assurance Society, said: “It was reported that the Chancellor had been mulling cutting the cash ISA allowance in today’s Spring Statement. This could now happen in the Autumn Budget instead.

"The government is trying to build a culture of retail investing – something we welcome if it supports people’s long-term financial wellbeing.

"If and when cash ISA reform comes, savers may start exploring alternative solutions for their money that still provide similar tax benefits."

Please remember the value of investments can go down as well as up and you may get back less than you invest.

Business

Another looming Budget bombshell is the 1.2% uplift to employers’ National Insurance Contributions, which will increase from 13.8% to 15% on earnings over £5,000, down from £9,100.

As well as pushing up independent school fees, the higher rate of National Insurance is likely to accelerate the exodus of schools from the Teachers’ Pension Scheme (TPS) and into Defined Contribution schemes, which could also attract Inheritance Tax from April 2027.

Steve Renfrew, Head of Education at Wesleyan Financial Services, added: "Higher employers’ National Insurance is contributing to the trend for independent schools to withdraw from the Teachers’ Pension Scheme – something that could push teachers into less generous pension schemes."

At the same time, the National Living and Minimum Wage will also rise, with over 21s receiving a 6.7% pay boost, while 18 to 20-year-olds will get more than 16% and apprentices will enjoy an 18% uplift.

These measures come into effect from April 2025 and will be of particular concern to GP and dental practices, as well as independent schools, where staff costs are among their biggest outgoings.

Coming after a period of significant wage inflation, these policies may well cause smaller businesses to pause hiring for more junior or entry-level positions.

Iain Stevenson, Head of Dental at Wesleyan Financial Services, said: "Many practices will still be absorbing the measures announced in the Autumn Budget, including hikes to employers’ National Insurance Contributions and the National Living Wage, which will heap extra pressure on practices’ finances.

"While there was some relief that no new employer taxes were announced in the Spring Statement, nothing was introduced to ease the burden either."

Finally, Business Asset Disposal Relief, which allows gains of up to £1 million to be taxed at a reduced rate of 10%, will rise to 14% in April 2025 and 18% from April 2026.

And it means any practice owner who had planned to sell up to fund their retirement will have to revisit their plans to work out if this will now achieve the outcome they had anticipated.

So, while the Spring statement was short on policies aimed at personal finances, the many uncertainties ahead only serve to emphasise the importance of seeking out expert advice to ensure your financial plans remain fit for purpose.

Tax treatment depends on the individual circumstances of each client and may be subject to change in future.