Spring Statement Delivers No Immediate Tax Rises, But Reforms Loom Large

The Spring Statement itself contained no new tax announcements or policy changes, but this masks substantial fiscal activity ahead. From April 6, 2026, a series of tax reforms announced in previous budgets will come into force, fundamentally altering the UK's tax landscape.

Key Tax Changes Taking Effect in April

• Basic and higher dividend tax rates will increase by 2 percentage points from April 6, though the additional rate remains at 39.35%
• Capital gains tax rates for Business Asset Disposal Relief and Investors' Relief will rise from 14% to 18%
• Inheritance tax thresholds will be reformed, with business and agricultural property relief capped at £2.5 million combined, with 50% relief on excess amounts
• Where spousal exemption applies, the combined cap increases to £5 million on the second death

The Finance Bill amendments also introduce significant changes to the taxation of offshore income gains in certain cases, representing a tightening of the tax treatment for investment income.

Fiscal Headroom Remains Slim Despite Upward Revision

The OBR's March forecast increased fiscal headroom by £1.9 billion compared to the Autumn Budget, but this remains historically low. The upward revision was driven primarily by stronger-than-expected equity price growth since November, which boosted capital tax receipts and self-assessed income tax revenues.

However, the OBR warns that this modest buffer could be rapidly eroded. The analysis was completed before the acceleration of Middle East tensions, and any escalation of the conflict could necessitate further emergency fiscal measures and tax increases before the year-end.

Economic Outlook Remains Fragile

The broader economic picture underpinning the fiscal position remains precarious. Nominal weekly wage growth is forecast to slow to around 3.5% in 2026, with real wage growth remaining subdued at below 1% in late 2025. The OBR expects real hourly earnings growth to average just 0.5% annually in the medium term as firms rebuild profit margins.

Business investment sentiment remains cautious, with firms citing economic and political uncertainty alongside heightened cost pressures. The net balance of firms planning to increase investment in the next three months has barely held positive territory in recent surveys.

Debt Burden Constrains Policy Options

UK public sector debt has nearly tripled as a share of GDP over the past two decades and now stands at nearly double the advanced-economy average. National Accounts taxes are forecast to rise from 36% of GDP this year to 38% by 2030-31, representing a historical high and nearly 6 percentage points above pre-pandemic levels.

The OBR notes that at least six months could pass before the next full forecast at the 2026 Budget, creating potential for material changes to the outlook before the government's fiscal rules are formally assessed.