With rumours swirling that the chancellor could be plotting another round of painful tax hikes, we look at the likely key announcements in next week's Spring Statement.
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Spring Budget preview: chancellor under pressure
The chancellor is set to deliver her Spring Statement next week (26 March).
The Treasury has insisted that this won’t be a major event in the financial calendar.
Rachel Reeves has previously committed to holding only one major fiscal event – the Autumn Budget – every 12 months, typically in October.
However, speculation is rife that tax hikes and spending cuts could be on the agenda to boost sluggish growth.
In this article, we reveal what you need to know and how it could affect your finances.
What is the Spring Statement?
Unlike the Autumn Budget, the Spring Statement – this year officially called the Spring Forecast – provides a smaller update on the UK economy.
The Office for Budget Responsibility (OBR) will also publish its latest forecasts.
As think tank Resolution Foundation points out, short-term economic growth is 1.2% weaker than expected since the Autumn Budget, and employment growth suggests a possible recession.
A stray £9.9 billion
As part of her Autumn Budget, the chancellor left herself with £9.9 billion financial “headroom”.
The latest Budget reportedly raised £40 billion – £25 billion coming from the employers’ National Insurance (NI) rates hike.
In one of the most surprising announcements in the October Budget, Reeves announced a 1.2% increase in employer payments.
Income Tax threshold freeze extended again?
Extending the freeze on Income Tax thresholds could be the biggest money-spinner for the Treasury.
Since 2021, the Personal Allowance (the amount at which you start paying tax) for Basic Rate taxpayers has been stuck at £12,570.
The Higher Rate kicks in on income above £50,271, and the Additional rate at £125,140.
At present, the hold is due to remain until 2028, but there are rumours Reeves could extend the freeze.
The impact of inflation
As wages and benefits rise, more Brits will be pulled into higher tax brackets.
According to an analysis by the Telegraph, someone earning £39,000 a year would pay an extra £810 in tax if the freeze is extended for 12 months.
The Institute for Fiscal Studies found that a two-year extension on Income Tax and National Insurance would raise £5 billion in 2028/29 and £10.1 billion in 2029/30.
Pensioners remain the biggest victims.
You can read more in this article.
Pensions triple lock
Although the Spring Statement has led to the usual pre-Budget speculation about the safety of the State Pensions triple lock, major changes seem unlikely.
Under the current system, annual pension increases follow inflation, average wages or 2.5%, whichever is higher.
That said, rumours will no doubt surface again ahead of the October Budget.
How much the State Pension pays in 2025
Could cash ISAs be safe?
Rumoured changes that would limit the tax breaks on Cash ISAs have allegedly been shelved.
Currently, savers can put up to £20,000 a year into an ISA without paying tax on the interest.
However, City executives had apparently proposed capping this at £4,000 to encourage more investment in stocks and businesses.
While this change could have generated around £202 million, critics argued it would discourage people from saving.
Again, this would have mainly hit older savers who tend to be more risk averse when nearing retirement.
Other tax rumoured changes
As part of the Autumn Budget, Capital Gains Tax rates increased from 10% to 18% for Basic Rate taxpayers.
Brackets increased from 20% to 24% for Higher Rate taxpayers.
There have been suggestions they could be increased again.
Inheritance Tax
There have also been rumours that the seven-year allowance could be slashed on Inheritance Tax.
Under this rule, no tax is due on any gifts you give if you live for seven years after making them.
Inheritance: how to pass on your wealth and property whilst minimising tax
Public spending and welfare cuts
According to reports, the Spring Forecast will slash public spending by £6 billion.
The Government plans to save £5 billion by tightening eligibility rules for Personal Independence Payments (PIP).
These are designed to help cover the additional costs associated with living with a disability.
The payments will apparently be frozen next year, instead of rising with inflation.
Several major charities, such as Scope, Mind and Citizens' Advice have written to the chancellor, urging her to protect this kind of support.
Charities urge this move could push an additional 700,000 disabled households into poverty.
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Pressure from US trade tariffs
Following recent political developments, the US has imposed a 25% tariff on steel and aluminium imports.
Tariffs increase costs for manufacturers and dampen global trade.
While the EU has announced counter-tariffs on US goods, the UK has yet to respond.
A focus on tech
The US and UK have started talks on a potential economic deal, focusing on technology.
The EU’s planned counter-tariffs will include agri-food products.
This could drive up prices for UK and European consumers.
How to protect your money
Luckily, there are ways to cushion the blow.
Maximise your tax allowances The UK has a long-standing love affair with Cash ISAs.
For many, these seem a safe option – easy to access and free from market volatility.
Plan ahead for tax changes: if thresholds are frozen, budgeting for a higher tax bill in the future could help.
Check your benefit entitlements: if you rely on state benefits, it’s vital that you stay on top of your entitlements.
Have your say
Is there anything you’d particularly like to see in the Spring Budget?
Or do you have any concerns about Reeves’ planned changes?
We’d love to hear your thoughts in the comments below.