The Chancellor has committed to a single major fiscal event each year to give stability and certainty on upcoming tax changes. As such, it is unlikely that the Spring Statement will focus on tax; instead, the focus will be on the economy and growth.
However, there are rumours (which may turn out to be wishful thinking), that changes may be announced to some of the tax changes previously made in the Autumn Budget.
What has been announced so far?
There have been a number of changes that have been announced that will become law following the Spring Statement, and once the Finance Bill 2024-25 is passed.
Non-domicile regime
The abolition of the non-domicile regime and the introduction of the Foreign Income and Gains regime has been a hot topic since it was first proposed by the previous government, hitting headlines recently due to the number of people leaving the UK, and questions around whether it will raise the amounts initially suggested.
It has been reported by global analytics firm New World Wealth and investment migration advisers Henley & Partners that more than 10,000 millionaires left the UK in 2024, a 157% increase on the previous year. When speaking at the World Economic Forum in Davos in January, Chancellor Rachel Reeves said she would “tweak” the transition period further to make it more attractive. Despite this comment, there has not been much evidence of this so far. Could we see changes following the Spring Statement?
Inheritance Tax
The two main changes to Inheritance tax so far are:
- The capping of 100% Business Property Relief and Agricultural Relief at £1m from April 2026. Both of these reliefs are currently uncapped, allowing qualifying businesses to pass tax-free between generations. However, it was announced in the Autumn Budget that property qualifying for 100% relief would be capped at a combined £1m for both Business Property Relief and Agricultural Relief. Property over £1m would qualify for relief at 50%
- Bringing pensions within the scope of Inheritance tax from April 2027. At present, pensions are outside of the Inheritance tax regime, which has made them an attractive tool for saving Inheritance tax. As the withdrawal from the inherited pension fund will potentially also be subject to Income Tax, the double taxation means that pension assets will be subject to an effective rate of 64% where the pension pot exceeds the Inheritance Tax threshold.
Both of these changes have had a visceral reaction from those most affected. There is a feeling that the changes are unfair and damage business and growth, with a particularly strong response from the farming community. This has led to speculation that there might be changes to these proposals. It will be interesting to see if anything is mentioned in the Spring Statement, or the promised consultation of the changes to Business Property Relief and Agricultural Property Relief.
National Insurance
The 2% increase in the rate of employer National Insurance mentioned in the Autumn Budget is due to kick in from April, and the level at which employers start paying NIC will reduce from £9,100 to £5,000. Whilst this was introduced on the basis that it would not affect workers’ wages, which may be true in the short term, it isn’t necessarily true in the long run, and businesses hit by the increase will look to save costs. As such, the long-term outlook is likely to be workers facing lower pay rises or job cuts. However, despite this, it seems unlikely the Government will reverse this in the Spring Statement.
Business Asset Disposal Relief Rates
The rate for Business Asset Disposal Relief will rise to 14% from April 2025 and 18% from April 2026. This will bring the rate for qualifying disposal a lot closer to the main Capital Gains Tax rate for higher and additional rate taxpayers of 24%. Could this change be reviewed as part of a desire to stimulate the economy?
Fiscal drag
It is likely that the policy of freezing the current tax thresholds will continue, and more people will be dragged into paying higher rates of tax.
More tax rises
Whilst we are not expecting more tax rises to be announced, it is possible that the Government could use the Spring Statement to announce further changes.
Although it is quite likely that tax measures will not feature in the 26 March announcement, our experts will be monitoring the statement, and should any policy changes be announced we will release our interpretation of these through the usual channels. Alternatively, you can subscribe here to receive our tax publications including any Spring Statement news.
