The Spring Statement 2025 confirmed the government’s aim to get more people working. This is part of wider plans to grow the UK economy. The Chancellor, Rachel Reeves, confirmed the welfare budget would be reduced to save £5 billion a year - but no further cuts were announced.
Here, we round up the key points from the Labour government’s Spring Statement 2025 and the impact it could have on your personal finances.
Cash ISAs under review
In the lead up to the Spring Statement, it was rumoured the government was considering cutting the Cash Individual Savings Account (ISA) allowance from £20,000 to £4,000 a year. The idea behind this is to get more people to consider investing in the stock market. Putting your money in the stock market offers the potential to grow your savings further over time than money held in a savings account or Cash ISA.
The Chancellor confirmed that the government is looking at ‘options for reforms to ISAs’ to encourage better returns for savers. The government said it’s also working closely with the Financial Conduct Authority (FCA) to help give more people the confidence to invest. However no changes were announced and the ISA allowance remains unchanged at £20,000 (2024/25 and 2025/26).
Pensions are a long-term financial product, which are invested in the stock market to get the best chance of growth on your money over the long term. You can adjust your exposure to risk as you get closer to your desired retirement age and want stability with your savings.
Income tax freeze to remain until 2028
Income tax rates will remain frozen until 2028. This means as your pay rises, you’ll pay more tax and could tip into a higher tax bracket. The rates have been frozen since 2021.
In England, Wales and Northern Ireland, you start paying 20% income tax when you earn more than £12,570 a year. When your pay hits £50,720, amounts above this face 40% income tax and it’s 45% on earnings above £125,140.
According to the Institute for Fiscal Studies (IFS), around 12% of UK workers are higher rate taxpayers. This figure has increased from 8% in the last five years and will continue to rise in the coming years.
Being a higher rate taxpayer also means your Personal Savings Allowance decreases. This is the amount you can earn in savings interest before tax is due. For basic rate taxpayers, it’s £1,000 a year. If you’re a higher rate taxpayer it falls to £500 a year. And if you’re an additional rate taxpayer, you have no allowance at all and face tax at 45% on all savings interest.
Chief Business Officer UK at PensionBee; Lisa Picardo says: “It’s disappointing the government didn’t address pensions complexity in the Spring Statement.”
To reduce your tax bill, you could consider paying into pensions or ISAs. Growth on money held in ISAs is tax-free. Whereas with pensions, you benefit from tax relief on your contributions and the money invested can also grow tax-free. Tax relief is effectively free money from the government. Usually basic rate taxpayers get a 25% tax top up on their personal contributions. This means HMRC adds £25 for every £100 you pay into your pension making it £125. When you choose to withdraw money from your pension (currently from age 55 rising to 57 from 2028), the first 25% is tax-free. Income tax may apply to subsequent withdrawals.
You can use PensionBee’s Pension Tax Relief Calculator to see how much tax relief could be added to your pension pot. Plus the calculator will tell you whether or not you need to file a Self-Assessment to claim a portion of it.
Welfare benefits to be cut
People who receive Personal Independent Payments (PIP) could see their benefits reduced or removed entirely from November 2026.
Meanwhile the health element of Universal Credit will be halved from £97 a week to £50 a week for new claims by 2026/27. This will remain frozen for claimants until 2029/30. Those already receiving the relief will have their money frozen at £97 a week until 2029/30. However, the Universal Credit standard allowance will rise from £92 a week to £106 a week by 2029/30.
The government’s aim is to save £5 billion a year in welfare spending by the end of the decade and help get more people into work. The changes only apply to England and Wales, but Scotland and Northern Ireland are likely to follow suit. You can see how you might fare under the new system through this PIP assessment calculator.
It’s worth noting that the changes are at proposal stage at the moment. The Department for Work and Pensions (DWP)’s Pathways to Work green paper is in the consultation stage. This means it’ll need to be debated in parliament before changes are approved.
What about UK interest rates?
Annual inflation was 2.8% in February 2025, remaining above the Bank of England’s 2% target. Economists expect inflation to remain above target for the rest of the year. As such, interest rates will remain higher for longer than previously anticipated.
Yesterday, the National Institute of Economic and Social Research (NIESR) said it expects only one more interest rate cut in 2025. The Bank of England base interest rate is currently 4.5%. One more reduction would likely take it to 4.25% by the end of 2025.
Higher interest rates mean you earn more interest on cash savings but your mortgage and other loan repayments could also be higher.
What about pension reforms?
Chief Business Officer UK at PensionBee; Lisa Picardo says: “This imbalance makes it harder for lower earners to build up their retirement savings. A flat 30% rate would level the playing field, ensuring everyone gets a meaningful boost to their pension - making saving fairer and encouraging more people to invest in their future.”
The UK’s pensions system is complex and figures suggest people aren’t saving enough into pensions. There are calls to make UK pensions clearer to understand and to encourage people to pay more to build up their retirement savings.
PensionBee believes the government should introduce a 10-day switch guarantee for pensions - similar to what exists for switching bank accounts. Currently, pension transfers can take up to six months.
PensionBee also wants to make pensions tax relief fairer. The current pension tax relief system provides greater incentives for higher earners, who receive 40% or 45% tax relief, while basic rate taxpayers receive 20%.
The government will announce the main tax changes for 2026 and beyond later in the year in the Autumn Budget 2025. The Labour government has said it’ll only deliver one comprehensive Budget each year, with the Spring Statement mostly focusing on economic updates.
A date hasn’t yet been given but the Autumn Budget typically takes place in October.
Elizabeth Anderson is a Personal Finance Journalist and Editor (Times Money, Metro and i paper).
Risk warning
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.
