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The Chancellor delivered the Spring Statement on 3 March 2026 as an interim update on the UK economy rather than a full fiscal event. In line with the government’s stated aim of holding only one major tax event each year, no headline tax cuts or sweeping reforms were announced.
Instead, the Statement focused on the economic outlook, public finances and confirmation of previously announced measures that will affect taxpayers over the coming years.
Economic Outlook and Public Finances
The government maintains that its economic plan is delivering progress, supported by forecasts from the Office for Budget Responsibility (OBR). However, the overall picture remains constrained, with limited growth and continued pressure on public finances.
Key economic forecasts include:
- Inflation expected to return to the 2% target in late 2026
- GDP growth forecast at 1.1% in 2026, averaging 1.6% thereafter
- Public sector borrowing projected to fall steadily over the forecast period
- The tax burden rising to a post‑war high of 38% of GDP by 2030/31
From a planning perspective, this reinforces expectations that tax thresholds will remain frozen and that future Budgets may continue to raise revenue through complexity rather than rate reductions.
Personal Tax: Fiscal Drag Continues
For individuals, the most significant impact remains the continued freeze on Income Tax and National Insurance thresholds until April 2031. This results in “fiscal drag”, where rising earnings lead to higher effective tax rates without any change in headline percentages.
Key personal tax points include:
- Personal Allowance frozen at £12,570
- Higher rate threshold frozen at £50,270
- Additional rate threshold remains at £125,140
- Dividend Allowance retained at £500, but dividend tax rates increase from April 2026
- Savings tax rates unchanged for 2026/27, with increases scheduled from April 2027
Practical example:
A taxpayer receiving dividend income above £500 will pay higher tax from April 2026, even though their allowance has not increased.
Property Income and Pension Considerations
Property owners and pension savers should also be aware of important future changes.
Property income:
- New standalone tax rates for property income introduced from 2027/28
- Rates rising to 22%, 42% and 47%, depending on tax band
Pensions:
- Annual Allowance remains at £60,000
- Lump Sum Allowances unchanged
- From April 2029, salary sacrifice pension contributions above £2,000 will become subject to National Insurance
These measures increase the importance of forward‑looking retirement and cash‑flow planning.
Employment Costs and Employer Obligations
Employers face a combination of rising wage costs and increasing administrative requirements.
Key employment measures include:
- National Living Wage increasing to £12.71 per hour from April 2026
- Employer National Insurance rate remaining at 15%
- Continued Employment Allowance of £10,500
- Mandatory payrolling of benefits in kind from April 2027
- Higher benefit‑in‑kind charges for company cars and vans
Practical example:
Businesses operating salary sacrifice pension schemes will need to model additional National Insurance costs well in advance of the 2029 changes.
Capital Taxes and Inheritance Tax Planning
Several capital and estate planning changes were confirmed, with potentially significant long‑term consequences.
Notable changes include:
- Business Asset Disposal Relief rate increasing to 18% from April 2026
- Reduced relief for sales to Employee Ownership Trusts
- Unused pension funds brought into the estate for Inheritance Tax from April 2027
- Agricultural and Business Property Relief capped at £2.5 million per person, with partial relief above this level
These reforms make early succession and estate planning essential, particularly for business owners and farmers.
Business Tax and Investment Reliefs
For companies, the Spring Statement offered stability in headline rates but added complexity elsewhere.
Business highlights include:
- Corporation Tax remaining at 25% for large companies and 19% for small profits
- Reduced Writing Down Allowance from 18% to 14%
- New 40% first‑year allowance for qualifying plant and machinery
- Expanded limits for EIS, VCT and EMI schemes to support growth and investment
Planning Remains Key
While the Spring Statement 2026 avoided major surprises, it reinforces a consistent message:
tax pressure is increasing, complexity is growing, and planning opportunities must be considered early
Individuals, employers and business owners should review their tax position, investment strategy and succession plans to ensure they remain efficient and compliant in an evolving fiscal environment. Professional advice can play a vital role in navigating these changes effectively
