Spring Statement 3 March 2026: Is that it?
The Chancellor, Rachel Reeves, delivered her Spring Statement on 3 March 2026. Despite repeated confident assertions that the government had the “right economic plan”, good news on the economy was thin on the ground. Unemployment is expected to rise to 5.3% later this year, and the Office of Budget Responsibility has downgraded its growth forecast for the year to 1.1% from 1.4% at the November Budget barely three months ago.
In slightly more positive news, there was a slight upgrade in the OBR’s growth predictions for 2026 and 2027 to 1.6% from the previous forecast of 1.5%. Inflation is expected to average 2.3% in 2026 before falling back to the target of 2% next year.
Whilst there were no tax policy measures announced, the OBR’s Economic and Fiscal Outlook contains some interesting data regarding the impact of the tax changes we already know about:
• Income tax receipts outside of self assessment are forecast to raise £480bn in 2025/26, up 11.7% from 2024/25. The increase is driven by a combination of higher employer national insurance contributions, combined with the effect of the freeze on income tax thresholds. Around 1 million pensions are forecast to be drawn into the income tax net by 2030/31.
• Capital gains tax is forecast to raise £22bn in 2025/26, a 60% increase on the previous year, suggesting that taxpayers took the opportunity to sell assets ahead of CGT changes announced in the October 2024 Budget. Policy changes, such as restrictions on Business Asset Disposal Relief and the abolition of non-UK domiciled status are expected to result in increased CGT receipts for each remaining year of this parliament.
• Inheritance tax receipts are expected to rise to £9bn in 2025/26, a 4.6% increase on 2024/25, driven by increases in house prices. Policy changes such as the restriction on BPR and APR from 6 April 2026 and the introduction of inheritance tax on pension pots means that inheritance tax receipts are likely to increase steadily in future years, although the expansion of 100% BPR/APR to the first £2.5m of assets, as announced in December 2025, will mean that the increase will be approximately £100m less than originally forecast.
• Corporation tax is forecast to raise £97bn in 2025/26, up 6.4% from 2024/25. Whilst tax receipts from smaller companies is expected to reduce, the OBR expects this to be outweighed by higher tax payments from the life assurance sector and larger businesses.
• VAT receipts are forecast to rise 4.4% to £181bn, helped by a shift towards standard rated goods and the result of activity reducing VAT non-compliance.
The OBR’s forecast was produced before recent events in the Middle East and must therefore be regarded as highly uncertain. Whilst on the current numbers, the Chancellor has more headroom to potentially increase spending or (and here’s a thought) actually cut taxes, we will have to wait until the autumn Budget for any further significant announcements.
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