Spring Statement 2025: impact on your personal finances

The Spring Statement 2025 was expected to be a damp squib, and that’s indeed what we got. Rachel Reeves kept her promise to hold one major fiscal event a year, despite fears the UK’s ailing fiscal position would force a stark volte-face.

That said, the chancellor stressed "the world has changed" since she last stepped up to the despatch box, leading to key policies that will impact the finances of some sections of society. 

Here’s a brief round-up of some things you need to know.

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Fiscal rule fiasco

Whether the chancellor would meet her self-imposed fiscal rules dominated the pre-event headlines. A combination of soaring borrowing costs, stagnant growth and higher interest rates threatened to wipe out the government's narrow headroom.

The main one of these, the stability rule, which requires that all day-to-day government spending is fully funded by tax revenues by 2029–30, was indeed off track. Alongside this there’s an investment rule where net financial debt should fall as a share of the economy.

Reeves said the Office for Budget Responsibility (OBR) confirmed that, in the absence of new measures, the stability rule would face a £4.1 billion deficit, someway short of the £9.9 billion target. However, the chancellor said the steps taken within her statement will deliver surpluses of £6.0 billion in 2027, £7.2 billion in 2028, and £9.9 billion in 2029. The OBR also confirmed that the investment rule would be met by £15.1 billion.

Paul Johnson, director at the Institute for Fiscal Studies, said: “This was just about the smallest fiscal event Rachel Reeves could have managed in the context of her fiscal rules and the minor forecast downgrade presented to her by the OBR. The fact that a fairly run-of-the-mill change to the forecast forced her to cut her spending plans reflects the tiny amount of headroom she chose to leave against her targets last October. In today’s Spring Statement, departmental spending plans and, it seems, welfare policy have been fine-tuned to return to precisely the same amount of headroom that she had previously.”

Growth forecasts and inflation

The UK's economic growth prospects took a blow, after the OBR halved its GDP forecast for 2025 from 2% to 1%, in response to elevated inflation. The consumer prices index, the UK's main measure of inflation, is predicted to average 3.2% this year, a sharp uptick against the previous forecast of 2.6%, which may force the Bank of England to delay the speed of interest rate cuts. Inflation will return to the Bank's 2% target in 2027, according to the OBR.

This arrived hot on the heels of data released this morning which showed inflation eased to 2.8% in February, coming in cooler than anticipated.

On a more promising note, the UK economy should pick up in the future, with growth expected to hit 1.9% next year, 1.8% in 2027, and 1.7% and 1.8% in 2028 and 2029, respectively. 

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Three key policies, at a glance

Reeves was keen to stress that any tax policies will be saved for the main event in the autumn, but pledged to crack down on tax avoidance schemes, beefing up the government’s coffers by an estimated £1 billion in addition to the current £6.5 billion raised.

In an event that was short on big policies, the most significant – and indeed divisive one – was the decision to cut welfare spend, which will impact more than three million families with an average loss of £1,720. By contrast, 3.8 million families will gain £420 a year. The government confirmed that it will reduce costs in this area by £4.8 billion by the 2028-29 tax year.

Elsewhere, Reeves also confirmed the creation of a £3.25 billion Transformation Fund “to support the fundamental reform of public services, seize the opportunities of digital technology and artificial intelligence (AI), and transform frontline delivery to release savings for taxpayers over the long-term”.

ISA reforms in motion

Measures that will directly impact our personal finances were thin on the ground, which wasn’t necessarily a bad thing. 

The chancellor reiterated her pledge not to raise headline tax rates on working people during this parliament, however, frozen tax thresholds, a tactic known in industry jargon as fiscal drag, will see our tax bills rise anyway. Rumours had surfaced that the chancellor might extend the deep freeze until 2030, but this didn’t come to pass. That’s not to say the prospect is off the table later this year.

There was no mention of pensions; the word only appeared a handful of times in the red pages. This wasn’t a surprise and will have evoked relief more than anything given speculated reforms ran wild in the lead-up to last year’s Autumn Budget, causing all manner of headaches for retirement savers.

The red book did mention a recent hot topic: individual savings accounts (ISA). Rumours have swirled that Reeves is considering cutting the cash ISA limit to £4,000 in a bid to encourage people to plough their tax-free allowance into the stock market, helping to boost the UK economy and improve saver returns.

On page 28 under “Going further and faster to unlock investment and unblock barriers to growth”, the document said: “The government is looking at options for reforms to Individual Savings Accounts that get the balance right between cash and equities to earn better returns for savers, boost the culture of retail investment, and support the growth mission. Alongside this, the government is working closely with the Financial Conduct Authority to deliver a system of targeted support to give people the confidence to invest.”

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What this ultimately means for the ISA landscape and when it will happen is unclear. On the plus side, this may pave the way to move towards a simpler ISA system, one which can help people choose to save and invest in things that are right for them.

Richard Wilson, CEO of interactive investor, shares his view on the matter: “The major platforms recently wrote to the chancellor on the ISA question to say let’s keep it simple: ‘one ISA’ please. Nothing new here; we’ve said it before. What is new is the idea that we use this to drive retail investors into the stock market with various ‘experts’ suggesting ‘let’s reduce the tax break on cash’ or ‘let's cap the amount of cash in the ISA’, adding back complexity and confusing industrial policy objectives with consumer choice.

“For some people having their cash in an ISA is sensible, for others filling their ISA with stocks is the right choice. What is dumb is to load the bases to incentivise the wrong choice. What is dumber is to think that this will drive higher retail engagement or UK growth when the big fat elephant that fills the room is stamp duty.”

All eyes on the Autumn Budget

The rumour mill about what the government might reveal later this year at the Autumn Budget will now start to turn, with fears that a further tax grab is on cards. A lot will depend on how Trump’s trade wars play out, and how the UK economy fares, between now and then. One certainty is that things will be a lot more eventful than they were earlier today.