The Spring Statement
No news – good news? The UK tax system seems to grow more complicated every year. It was therefore a relief to hear Rachel Reeves’ promise, in her first Budget in October 2024, that she would restrict herself to one ‘fiscal event’ a year. She would not tinker with the tax system in November and again in March, as some of her predecessors have done. On this occasion at least, she has kept her promise: her speech contained nothing about tax, and there were no new documents released onto the internet by HM Revenue & Customs when she sat down. The purpose of the Spring Statement was to present the economic and fiscal forecast prepared by the Office for Budget Responsibility (OBR). Their report estimates economic growth, inflation, unemployment rates and other factors for the next five years, and discusses the effect on the government’s finances. The economists recognise that theirs is not a precise science: in November they predicted growth of 1.4% for 2026, but that has now been cut to 1.1% (to be made up by slightly higher forecast growth in the following two years). On the other hand, some of their statistics are more positive than they were in November, and their overall assessment is that government borrowing will fall considerably by the end of the forecast period. They note that significant risks could impact the UK economy – the conflict in the Middle East escalated as they were finalising their work, and could not be reflected in the calculations, but it is likely to have an impact on fuel prices and therefore inflation. That could affect the government’s financial ‘headroom’ and require more tax-raising in the next Budget. Ms Reeves expressed confidence in her ability to beat the forecasts, but the OBR noted ‘Plans to reduce borrowing and stabilise debt have been a common feature of forecasts since the pandemic, but have not yet materialised in outturn.’ We will have to see where we are when the Chancellor returns to making tax changes in the autumn. The brief pause in announcing new changes to the tax system gives us a chance to take stock of what we already know about, and consider its impact. Each Budget includes announcements that will take effect immediately and also later, sometimes years ahead. We are about to see the rollout of Making Tax Digital for Income Tax, which was originally announced by George Osborne – there have been seven Chancellors since he held the office. In this document we have gathered together the measures that will come into effect in the coming year, as well as looking ahead to things that may require advance planning. If you would like to discuss how any of these matters affect you and your finances, we will be happy to help.
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