Upon taking office, the Chancellor indicated that the Government would hold just one Budget per year in the autumn, when tax policy would be set, and the upcoming Spring Statement was supposed to be an update on the public finances alongside the Office for Budget Responsibility’s (OBR’s) latest economic outlook.
However, some experts have warned that the Spring Statement might effectively become a mini Budget, with Reeves facing a choice between further tax rises or spending cuts.
What could be in the Spring Statement?
Jason Hollands, managing director at Evelyn Partners, said: “It is currently more likely that we will see spending cuts rather than tax rises. The Chancellor should be well aware that the tax measures announced at the October Budget have had a chilling effect on the economy, especially the rise in employer National Insurance contributions.
“With businesses now facing the threat of US tariffs, more tax rises would be very damaging. The Government is also boxed in by Labour’s manifesto pledges not to raise income tax, NI, VAT or corporation tax.”
Income tax freeze rumours
One rumour doing the rounds is that Reeves could announce a further extension to the freeze on income tax personal allowances and thresholds beyond 2028.
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The multi-year freeze on allowances, such as the annual tax-free Personal Allowance and the threshold at which higher-rate tax is paid, is a form of stealth tax that operates by fiscal drag. This is the process by which millions more people are pulled into the higher rates of tax as wages rise over time.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “We’ve felt a stealthy squeeze on our wallets ever since the tax thresholds were frozen in 2021/22, so speculation that we might have to endure it for even longer is highly unwelcome.
“At this stage, it’s only speculation, and the Government has made it clear that there shouldn’t be major tax changes announced in the Spring Statement. These rumours would therefore rely on this change not being classed as major, which is highly debatable.
“The freeze has already hit taxpayers hard. In 2024/25, there are an estimated 37.4 million income taxpayers, up 4.4 million from when thresholds were frozen in 2021/22. There are 2.1 million more basic-rate taxpayers, 1.88 million more higher-rate taxpayers and 610,000 more additional-rate taxpayers – more than double the number before the freeze. There are also around 8.5 million taxpayers over state pension age – around a quarter more than before thresholds were frozen.”
The future for ISAs
There has also been speculation over the past few weeks that Reeves could overhaul ISA rules this year, potentially slashing the annual contribution limit to as little as £4,000 for cash ISAs.
Hollands said: “As some asset managers and City brokers have been busy lobbying for measures to divert more investment funds into UK equities, the speculation has grown that the Chancellor is listening and could look to restrict the amount of cash going into ISAs, nudging savers towards investing instead.
“It seems very unlikely that cash ISAs would be scrapped entirely. However, capping them as a proportion of the current allowance is a credible threat and would essentially turn the clock back by a decade, as prior to 1 July 2014, the proportion of the ISA allowance that could be held in cash was limited to 50% of the overall allowance.”
