“A once-in-a-parliament Budget to wipe the slate clean.”  That was how Rachel Reeves summed up her Government’s first Budget just a few months ago.  

With huge tax rises worth £40 billion – the biggest increase in a generation1 – the Chancellor hoped her plans would plug a ‘black hole’ in the nation’s finances and help put the UK back into growth mode. 

But that’s not the way it’s panned out. Inflation is up2, so are Government borrowing costs3. A ‘fiscal buffer’ of £9.9 billion built into last October’s Budget has been wiped out4. Without further action the Chancellor risks breaking her own ‘non-negotiable’ rule of not funding day-to-day public spending from borrowing. 

So while Wednesday was scheduled to be a straightforward update on the official Office for Budget Responsibility economic forecasts, it could now be a much more wide-ranging statement. 

What could we expect and what’s not happening? 

The Government has previously committed to just one major fiscal event – that is, a formal Budget statement – per year. So its focus on Wednesday is likely to be on spending cuts rather than putting up taxes. It has already announced plans to save £5 billion by reforming UK welfare5. More cuts in other departments could follow. However, there are still areas worth looking out for as the Chancellor gets to her feet in the House of Commons.  

ISA reductions 

There’s been pressure on the Government to reduce the annual tax-free limit on cash ISAs from £20,000 to £4,000 (some have even argued cash ISAs should be scrapped completely). The idea behind this is that it would encourage more people to invest their savings in stocks and shares ISAs instead.  

The latest reports are the Chancellor won’t be changing the rules on ISAs during this Spring Statement. It could, however, still be something that features in the Autumn. 

Taxes 

Labour has already pledged not to raise income tax. However, what hasn’t been ruled is extending a freeze to personal tax thresholds. Freezing these thresholds, instead of putting them up with inflation, could mean more people moving into higher tax brackets. The threshold is already frozen until April 2028. Extending the freeze further could raise an estimated £7 billion6. 

In Scotland, where the Scottish Government has some tax-raising powers, the Higher, Advanced and Top rate thresholds are already confirmed to be frozen at their current levels until 2027. 

Inheritance tax reform 

In October, farms and business properties were brought into the scope of inheritance tax (IHT) and a Government consultation on these changes concludes in a month’s time. The IHT exemption on pensions is also set to end in 2027. We wait to see if further IHT reforms are announced. 

National Insurance 

National insurance contributions (NIC) for employers rise to 15% from 6 April. Despite opposition from businesses to the move, it’s unlikely the Chancellor will reverse this. However, that’s not to say additional relief, for example increasing employment allowance, or the threshold for when national insurance is payable, couldn’t be altered. 

What to do next 

With the Government insistent this is not a formal Budget, it’s unlikely Wednesday will include big shifts tax wise. But the Chancellor could still give notice of plans for the future, even bringing forward policy announcements ahead of this Autumn.  

As with any policy statements, it’s important not to pre-empt decisions and always take professional advice before making any major financial commitments.  

If you have any questions, or want to explore your options, our financial planners are here to help. Please get in touch. 

 

If you have any questions or wish to explore your options, reach out to us. Our team of experts is ready to assist you. please don’t hesitate to contact us on 0333 241 3350 or email info@richmondhousewm.co.uk 

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