The Spring Statement: What does it mean for 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.

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 people will inevitably be pushed into higher tax bands over time.

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.

The Financial Conduct Authority 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 deposit 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."

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.

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.

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.

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.

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

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