Last week, on Wednesday 26th March 2025, Chancellor of the Exchequer, Rachel Reeves, delivered her Spring Statement. This acts as an update on the economy since the last fiscal statement in October, and is not a formal budget. Here’s a quick overview to some of the main changes:
Benefits
The standard allowance of universal credit will increase, with the rate for a single person aged 25 or over going up from £92 a week to £106 a week by the 2029/30 tax year.
For new claimants, the health element will go down from £97 a week to £50 in a week in the new tax year, and then be frozen at this level until 2029/30. For existing claimants, the health element will be frozen at £97 until 2029/30.
The Work Capability Assessment will be scrapped in 2028, with the Government instead consulting on a new single assessment based on the PIP system.
Assessments for the daily living component of Personal Independence Payment (PIP) will be tightened. These assessments involve questions about every-day tasks; each question is scored from a scale of 0 to 12 by a health professional, with 0 meaning no difficulty is experienced, and 12 meaning the most severe. Currently, to get this main component of PIP, you need 8-12 points in total, but from November 2026, you will also need 4 points or more on a single activity.
For more information on the changes to benefits, check out this blog.
Defence Spending
Reeves announced that an extra £2.2 billion will be spent on the UK’s defence over the next year, with a target of defence spending reaching 2.5% GDP by 2027. Overseas aid is to be reduced to 0.3% of Gross National Income, saving £2.6 billion by 2029/30
Tax
HMRC’s Making Tax Digital for income tax regime will now capture sole traders and landlords who have income over £20,000 from April 2028. Additionally, HMRC’s free software will not be available for taxpayers submitting quarterly returns so third party software will have to be used instead.
No further tax increases have been announced this time around, but bear in mind that penalties for late payment of VAT or income tax are set to increase from April 2025. The new rates are:
- 3% of the outstanding tax if overdue by 15 days or more
- An additional 3% penalty if overdue by 30 days or more
- An additional 10% per annum when overdue 31 days or more
Other
- The Office for Budget Responsibility has halved the UK growth forecast for 2025 from 2% to 1%. Reeve stated: “I am not satisfied with these numbers”.
- The OBR has calculated that the announced changes will save £2.4 billion rather than the £5 billion initially stated by the Government
- The government plan to cut the costs of running government by 15%, which means we could see substantial cuts to civil service jobs
- The government predict that policy changes will help build 1.3 million homes in next 5 years
- Inflation is predicted to reach the target rate of 2% by the end of 2027
- £600,000 is to be spent training up to 60,000 more construction workers by 2029
- £100 million has been allocated towards funding HMRC to recruit a further 500 compliance officers from April 2025. An additional 600 staff will also be recruited into HMRC’s debt management teams
You can download the Spring Statement here.