Spring Statement 2025

The Chancellor of the Exchequer, Rachel Reeves, delivered the Spring Statement on Wednesday 26th March. Below we provide a summary of the immediate announcements from the Spring Statement and what they mean for your finances.

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Pensions

Individual Savings Accounts (ISA)

The investment limits for 2025/26 remain £20,000 for a standard adult ISA (within which £4,000 may be in a Lifetime ISA – unchanged since 2017/18), and £9,000 for a Junior ISA or Child Trust Fund. These limits have been frozen until April 2030.

Pension contributions

Before the 2024 Autumn Budget, there were fears that the Chancellor might reintroduce income tax charges on pension pots above a ‘lifetime allowance’, or limit the amounts that can be drawn tax-free. In the event, no such changes were made; instead, an Inheritance Tax charge on undrawn pensions was announced to be introduced in 2027 (described below under Inheritance Tax). If the Chancellor needs to raise money by the next Budget, there will no doubt be further speculation that this would be somewhere she could impose charges without breaking her manifesto pledges.

The level above which contributions to a registered pension scheme may trigger an Annual Allowance charge remains £60,000. The maximum amount that can be withdrawn as a tax-free lump sum remains £268,275, unless the person is entitled to ‘protection’ in relation to the original introduction of the Lifetime Allowance or any of the subsequent reductions of the limit.

Capital Gains Tax

For the 2025/26 tax year, the rates of Capital Gains Tax (CGT) remain unchanged at 18% for basic rate taxpayers and 24% for higher rate taxpayers on general assets, with the annual exempt amount also staying at £3,000. However, the rates were adjusted on 30 October 2024 during the Autumn Budget, creating potential complications for 2024/25 tax returns.

Prior to this change, general gains within the basic income tax band were taxed at 10%, with a 20% rate for higher rate taxpayers, while CGT on chargeable residential property (such as second homes and rental properties) was set at 18% and 24%. Taxpayers with gains exceeding the exempt amount must report them, though if the gains are below the exemption limit, detailed reporting is only required if total proceeds from chargeable disposals exceed £50,000, excluding disposals covered by main residence relief.

Inheritance Tax

The Inheritance Tax (IHT) nil rate band remains fixed at £325,000 until the end of the 2029/30 tax year, a threshold that has been in place since 6 April 2009. This long-standing freeze means that more people will fall within the scope of IHT. However, the £175,000 ‘residential nil rate band enhancement’ on death transfers, also fixed until 2029/30, can help reduce the impact where applicable. For married couples, this allows up to £1 million to be passed on free of IHT to direct descendants or their spouses (£325,000 from each parent, plus £175,000), though the rules can be complex. With these nil rate bands set to remain unchanged for the next five years, effective IHT planning is increasingly important.

Review your financial plan

We recommend that you review your financial plans regularly as some aspects of the Budget will not be implemented until later dates.

We will, of course, be happy to discuss with you any of the points covered and help you adapt and reassess your plans in the light of any legislative changes. We encourage you to visit Carpenter Box Accountant’s website for more information on the key tax changes announced in the Chancellor’s speech.

For further advice on any of the topics raised, please get in touch on 01903 534587.

This information is correct as of 26th March 2025.