The first Spring Statement delivered by the current Chancellor of the Exchequer, Rachel Reeves, on 26 March, made for fairly gloomy headlines. The OBR (Office for Budget Responsibility) has downgraded its estimate of growth for the UK economy from 2% to 1% for the current year, although it has upgraded its estimates to 1.9% for next year and to 1.8% for 2027.
The Spring Statement was meant to be a routine update on the public finances, but Reeves has been forced to make more extensive changes to the benefits system, after her plans were blown off course by lower growth and high government borrowing costs.
There were no further changes announced to tax rates or tax bands for the new 2025/26 tax year, and key figures remain as follows:
Pensions
• Standard annual allowance remains at £60,000.
• MPAA (Money Purchase Annual Allowance, for individuals who have accessed flexible pension income) remains at £10,000.
• The Lifetime Allowance has been abolished, but restrictions remain on total tax-free lump sum (£268,275) and lump sum death benefits (£1,073,100).
• Flat rate state pension to increase from £221.20 to £230.25 per week.
• Pension funds to be included in the value of an individual’s estate for IHT purposes from April 2027.
Income Tax
• Personal allowance remains at £12,570.
• Higher rate tax threshold remains at £50,270.
• Additional rate tax threshold remains at £125,140.
• Rates of income tax unchanged (basic rate 20%, higher rate 40% and additional rate 45%).
• Note that an effective income tax rate of 60% applies between £100,000 and £125,140, due to the loss of £1 of personal allowance for every £2 of income.
Capital Gains Tax
• Capital gains tax for gains on investments and other assets remains at 18% (basic rate) and 24% (higher rate).
• Capital gains tax for gains on residential property remains at 18% (basic rate) and 24% (higher rate).
• Capital gains tax allowance remains at £3,000.
Other Individual Tax
• Dividend allowance remains at £500.
• Personal savings allowance remains at £1,000 (basic rate taxpayers), £500 (higher rate taxpayers) or £0 (additional rate taxpayers).
• Income level at which child benefit starts to be reduced remains at £60,000.
Corporation Tax
• Corporation Tax remains at 25% for larger companies (profits above £250,000).
• Corporation Tax for smaller companies (profits below £50,000) remains at 19%, with tapered rates for profits £50,000 – £250,000.
ISAs
• ISA allowance remains at £20,000.
• JISA allowance remains at £9,000.
• LISA allowance remains at £4,000.
Please note that different tax rates and allowances apply in Scotland.
This article is for information only and should not be construed as advice or a recommendation. You should always seek independent financial advice prior to taking any action.
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