What is the Spring Statement?

The Labour government has committed to only holding one Budget per year in the autumn. As such, the Spring Statement has focused on government finances reviewing areas like – how much the government is going to take in taxes and how much are they going to spend and borrow. As Labour have set their own budgeting rules, the statement is an assessment of how they’re delivering against this.

What were the key takeaways?

The Chancellor stuck to her commitment to not make personal taxation changes and has focused on how the government will meet their “fiscal rules”. Interest rate movements and higher than expected government borrowing since the last Budget in Autumn means the Chancellor has had to make adjustments to government spending plans in order to meet these.

Here’s a summary of the key takeaways:

Civil Service expenditure cuts: The government announced plans to reduce the running costs of the civil service by £2bn, with an expectation that 10,000 jobs will be cut. The government also announced a £3.25bn “Transformation Fund” to drive these efficiencies and save money for the government later on in this Parliament

Reduction in the Welfare budget: As previously announced by the Work and Pensions Minister Liz Kendall on the 18th of March, the government will look to save £5bn from the Welfare budget over the cost of this parliament. The Chancellor confirmed today that the Office for Budget Responsibility has independently scored and confirmed the anticipated savings.

Increased Defence spending: Referencing a “changing world” and increased uncertainty, the Chancellor announced an extra £2.2bn in defense spending and confirmed the UK would hit the target of 2.5% of GDP spent on defence by 2027. The government also hopes this increased defence spending will boost economic growth.

No (immediate) change to cash ISAs:

Despite a lot of noise and speculation in recent months, there were no changes announced to ISAs.

  • Your ISA allowance for this tax year (2024/25), ending on the 5th April, remains unchanged at £20,000. 
  • Your ISA allowance for the next tax year (2025/26), starting on the 6th April, also remains unchanged at £20,000.

The Chancellor did however confirm that they are looking at options to reform ISAs in the future and find the right balance between saving and investing for consumers. In doing so they will be working closely with the Financial Conduct Authority (FCA) to increase investing confidence in the UK. Moneybox has been and will continue to regularly engage with the Treasury and the FCA to ensure that our customers are front of mind in any review.

With the tax year-end approaching, it’s an opportunity to review your finances and take advantage of the tax-free benefits available.

Here’s what hasn’t changed:

With a week to go until the end of the tax year, here is a reminder of your key tax allowances for this tax year and next:

  • Lifetime ISA (LISA) allowance – maximum contribution of £4,000 each tax year.
  • ISA allowance – maximum contribution of £20,000 each tax year. Shared across any ISAs including a Lifetime ISA, Cash ISA and Stocks & Shares ISA.
  • Junior ISA allowance – maximum contribution of £9,000 each tax year per child. This is on top of your ISA allowance.
  • Pension allowance – maximum contribution of £60,000 each tax year.
  • Personal Savings allowance – earn a maximum £1,000 of savings interest each year tax-free, dependent on your tax-bracket.
  • Capital Gains allowance – earn a maximum £3,000 of capital gains each tax year tax-free.
  • Dividend allowance – earn a maximum £500 dividends each tax year tax-free.

All allowances will reset on the 6th April 2025. Make the most of them ahead of the tax year deadline (5th April) and take advantage of your refreshed allowances as the new tax year comes in.

 

For Lifetime ISA – Govt. withdrawal charge may apply. For investing accounts – Capital at risk. ISA and tax rules apply. For Personal Pension – The value of your pension can go up and down, and you may get back less than you invest. Tax treatment depends on individual circumstances and may be subject to change in the future.

A 25% government penalty applies if you withdraw money from a Lifetime ISA for any reason other than buying your first home (up to £450,000) or for retirement, and you may get back less than you paid into your Lifetime ISA. 

Interest rate subject to conditions. A lower rate of 0.75% AER (variable) applies if certain account conditions aren’t met. Interest is accrued daily and paid into your account yearly on the date you opened your Cash ISA. Introductory bonus interest is calculated daily and paid following the expiry of your bonus offer period into your Cash ISA. The underlying interest rate is variable, and we’ll keep you informed if it changes. You can see how much interest you’ve accrued by logging in and going to Wealth > Cash ISA > Breakdown.

Capital at risk. All investing should be long term. The value of your investments can go up and down, and you may get back less than you invest. 

Tax treatment depends on individual circumstances and may be subject to change in the future.