The Spring Statement 2025 has brought several important changes that could affect your personal finances. With lower growth forecasts, inflation expectations, and new welfare reforms, it’s crucial to understand how these updates could impact your financial planning. Here’s a breakdown of the key changes and tips on how to adjust your strategy accordingly.
Economic Outlook – Slower Growth, Higher Inflation
The UK’s economic growth forecast has been reduced from 2% to just 1% for 2025, according to the Office for Budget Responsibility (OBR). Alongside this, inflation is expected to average 3.2% this year. This could result in higher living costs, making it important to revisit your budget and consider inflation-adjusted investments or savings plans.
Welfare Reforms and Universal Credit Changes
One of the most significant updates in the Spring Statement is the change to Universal Credit. The standard allowance will increase from £92 to £106 per week by 2029-30. However, some benefits, like the health element, will be cut by 50% for new claimants. For those receiving incapacity benefits, the payments will be frozen until 2030. While some families will see an improvement in their finances due to the increase in Universal Credit, others may experience a reduction in support. It’s essential to reassess your finances if you’re impacted by these changes.
Government Spending Cuts and Job Market Shifts
In an effort to balance the budget, non-defence and non-health sectors will see budget cuts of up to 11%. However, defence spending will increase by £2.2 billion, and there’s £150 million allocated to employee exit schemes for a leaner Civil Service. This could result in public sector job reductions. On the flip side, the defence and construction sectors are likely to see job creation, so if you work in these industries, it may be worth exploring new opportunities.
Housing Market Boost and Potential Opportunities
The government’s focus on housing includes a £600 million investment to train 60,000 construction workers over the next four years. This is expected to help increase the number of new homes being built, with a target of 305,000 homes per year by 2030. These efforts could have a positive impact on housing availability and affordability, making it a good time for potential homebuyers to start planning or for current homeowners to consider their next move.
Taxation Updates – No New Tax Increases but a “Stealth Tax” Effect
While Chancellor Rachel Reeves has not announced any new tax increases, the freeze on income tax thresholds has been extended beyond 2028. This “stealth tax” effect means that as your income rises, you could end up paying more in taxes even if the rates remain the same. It’s important to adjust your tax planning accordingly and consider strategies such as maximizing your ISA allowances or other tax-efficient investments.
Pensions, Savings, and Investments – What’s Staying the Same
The good news is that the state pension triple lock will be maintained, resulting in a 4.1% increase in April 2025. However, the annual ISA allowance remains unchanged at £20,000. If you’ve been contributing to ISAs, it’s important to take full advantage of this allowance before it resets next tax year. As the government explores potential changes to ISAs, it may be worth keeping an eye on any upcoming reforms that could impact your savings strategy. Consider diversifying your portfolio to make the most of tax-efficient saving options.
Cost of Living Adjustments and How to Adapt
Household expenses are set to rise in April, with increases expected in water bills, energy costs, and council tax. Despite these increases, real household disposable income is expected to grow by an average of just 0.5% annually until 2030. This means it’s a good idea to adjust your household budget and look for ways to save, such as cutting back on non-essential spending or reviewing your utility providers for better deals.
Investment Strategy – Preparing for ISA Reforms
While no immediate changes to ISA allowances have been announced, the government is considering reforms to encourage more investment through stocks and shares ISAs rather than cash ISAs. This could affect your investment strategy moving forward. If you’re currently using cash ISAs, it may be worthwhile to explore other investment options that offer potentially higher returns, such as stocks and shares ISAs, especially if interest rates for savings accounts remain low.
The Spring Statement 2025 presents a range of changes that could affect your personal finances, from tax and welfare reforms to housing and job market shifts. With the economic outlook in flux, now is the time to review your financial plan and make necessary adjustments. Consulting with a financial advisor can help you navigate these changes and ensure that your strategy is aligned with the new economic environment.
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If you have any questions about how the Spring Statement will affect you and your finances, please get in touch.
All information is from the Spring Statement documents on this page.
The content of this Spring Budget summary is intended for general information purposes only. The content should not be relied upon in its entirety and shall not be deemed to be or constitute advice.
While we believe this interpretation to be correct, it cannot be guaranteed, and we cannot accept any responsibility for any action taken or refrained from being taken as a result of the information contained within this summary. Please obtain professional advice before entering or altering any new arrangement.
