What will the spring statement bring?

Andrew Prosser, head of investments at InvestEngine, said: “While the upcoming spring statement might not bring with it sweeping financial reforms, the tone and outlook could still shape consumer and business confidence for the rest of the year.

“Last year’s spring statement saw the Chancellor take the opportunity to make major spending announcements.

“Notably we had signals of plans for ISA reform, which paved the way for the cut to the cash ISA allowance announced later that year – all part of a broader push to improve the country’s investment culture.

“It shows that, despite wanting to move to one major fiscal event each year, the Chancellor has repeatedly been drawn into making fiscal announcements at other points in the year too.

“And ahead of this year’s statement, there are several personal and business finance issues Rachel Reeves should be looking to address and clarify to boost confidence in the government’s plans – first and foremost: the ‘tax trap’.

“Despite wanting to boost the UK’s investment culture, the government crucially chose to extend the freeze on income tax thresholds until 2031, leaving people worse off and with less money to put aside.

“As wages rise, fiscal drag means more people are being pulled into higher rates.

“The latest government figures project over seven million people will pay the higher rate of tax in 2025/26, a near 39 per cent increase on 2022/23.

“The number of additional-rate taxpayers has risen even more sharply – up 115 per cent over the same period.

“Within this group are those caught in the ‘tax trap’ – individuals earning between £100,000 and £125,140 who face an effective marginal rate of 60 per cent as they lose their personal allowance.

“Failure to address this will result in people unable to invest as more of their money is going straight to the taxman.

“As well as individuals being forced to pay more in tax, many SMEs are also facing high business costs from national insurance rates and current uncertainty around dividend tax change.

“The spring statement would be a good opportunity for the Chancellor to look to ease some of the financial pressures like national insurance on businesses and offer clarity and reassurance about future outlooks.

“While some expect this year’s statement to offer little financial change, we hope to see the government provide clarity on its policies in order to build up confidence, encourage behavioural change, and improve financial outcomes for the public.”