The Chancellor has announced the timing of her next formal report to Parliament.
Think back to when Philip Hammond was Chancellor, six Chancellors ago. In the autumn of 2016, he unveiled a shift in the timing of Budget announcements. The Spring Budget and Autumn Pre-Budget Report (PBR) would be replaced by an Autumn Budget and a Spring Statement. The goal was to end the practice of having two Budgets each year, as the PBR often introduced just as many, if not more, tax changes than the actual Budget. The new scheduling was favored by the Institute for Government who gave it a warm welcome, but as with many things this became entangled in other business, notably general elections and COVID.
In her March 2024 Mais Lecture, Rachel Reeves confirmed that if she became Chancellor she would revert to Hammond’s schedule and have only one major ‘fiscal event’ each year, that is, an Autumn Budget. We do know however, that the Office of Budget Responsibility (OBR) is legally bound to provide two reports each fiscal year covering our finances and details on our economy and so on. This means a Spring statement of some description is due.
Spring Forecast 2025
Shortly before Christmas, the Treasury announced that the 2025 ‘Spring Forecast’ would be presented to Parliament on 26 March, the day that the OBR’s report is to be published.
While the accompanying press release did not rule out any tax changes in March, it did say, “The Chancellor remains committed to one major fiscal event a year to give families and businesses stability and certainty on upcoming tax and spending changes”.
The statements, along with the ongoing discussions from last October’s Budget, suggest that no new tax measures will be introduced on March 26, even if the OBR figures are underwhelming. However, in January, following an increase in government borrowing costs, rumors began circulating that spending cuts were on the horizon.
Tax year planning checklist
The probable absence of tax changes is good news as we enter the season of planning for the tax year end and the start of a new tax year. If you consider the £40billion of tax increases in autumn last year, tax planning should certainly be a priority in 2025.
Consulting a tax professional is always advised when planning for the future, as it is often difficult to navigate the complexities of tax and its recent changing landscape.
Here are some helpful tips for getting your financial and tax affairs in order:
- Pension contributions: From 2027/28, pensions fall within the realms of IHT – which makes the review of pension contributions slightly different from what we’re used to. For the majority, pensions continue to be an extremely tax-efficient way to save for retirement. However, for those who are less focused on retirement income, they are no longer the ideal tool for estate planning.
- Capital Gains Tax (CGT): CGT rates increased in the Budget to 18% for basic rate taxpayers, and to 24% for higher and additional rate taxpayers. Be mindful of your annual exemption – now just £3,000 of gains.
- IHT: Now is the time to use your annual exempt amount (£3,000 per tax year) for 2024/25 if you have not already done so. If you didn’t use your full exemption for 2023/24, you can also gift the remaining amount once you’ve used up this year’s exemption.
- Marriage allowances: If you or your spouse/civil partner had income below the personal allowance in 2020/21 (£12,500), you have until 5 April 2025 to claim the marriage allowance for that year (£1,250), which could produce a tax saving of up to £250. A claim can only be made if the other partner was a basic rate taxpayer (starter, basic or intermediate rate in Scotland) in that tax year.
- Threshold planning: The long-term freezes on Income Tax allowances and various thresholds could push you into a higher tax band in the upcoming tax year. Similarly, you may find yourself surpassing the unchanged £60,000 threshold for the high-income child benefit charge or the £100,000 threshold that triggers the personal allowance taper and loss of tax-free childcare. To navigate these fixed thresholds, you could consider bringing income forward into 2024/25 (such as by closing an interest-bearing account), utilising pension planning to mitigate your personal allowance taper, or transferring some income-generating investments to your (lower-income) spouse or civil partner by April 5.
- Domicile reform planning: The much-publicised reform for the taxation of non-UK domiciled individuals was outlined within HMRC’s autumn budget, meaning that updated draft legislation has been published in relation to both the taxation of Foreign Income and Gains (FIG), and Inheritance Tax. Whilst these proposed changes have not yet been formally legislated, if you are currently considered a non-UK domiciled individual under the existing UK tax regime, you have recently moved to the UK, or you intend to move to the UK in the foreseeable future, it will be vital to seek specialist advice on the extent to which these proposed changes apply to you and how these can be navigated as tax efficiently as possible. Notably, there are potential benefits under the new FIG proposals in certain cases for long-term non-UK resident individuals returning to the UK, which will be important to maximise upon repatriation.
Preparing for change with Progeny
With adjustments still being made from last year’s UK Autumn Budget, and some uncertainty ahead on the nature of the Spring Forecast, preparation is recommended. We can support you by taking a solution-oriented approach to your goals, with professional tax specialists available to prepare you with what you need in times of change.
Whether you need Inheritance Tax planning advice, assistance when leaving or returning to the UK, or help more generally with maximising the efficiency of your finances, we can provide tailored financial and tax advice to help you meet your objectives. Please don’t hesitate to contact us today.
Important Note
The information contained within this document is subject to the UK regulatory regime and is therefore primarily targeted at consumers based in the UK.
This article is distributed for educational purposes only and should not be considered financial advice.
If you are unsure about the suitability or otherwise of any product or service, we recommend that you seek professional advice.
The opinions stated in this document are those of the author and do not necessarily represent the view of Progeny and should not be relied upon to make a financial decision.
Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.
Please note
Tax treatment depends upon individual circumstances and is based on current UK tax legislation, that is subject to change at any time.
