Pensions, ISAs and stamp duty: The tough choices experts expect Rachel Reeves to make in the Spring Statement

Chancellor Rachel Reeves will speak on Wednesday to give the Spring Statement – with a mix of problematic themes and possibilities to cover as the UK attempts to promote economic growth but also battles with soaring borrowing.

Pledging no more tax raises only leaves a few options for Ms Reeves. Those are primarily around reallocating funds or cutting even more spending – and it’s the latter which appears to be most likely to happen following big tax hikes as recently as October.

So what are the big decisions facing Ms Reeves, and which direction will she and the government take with them? The Independent spoke to experts to see not just what might emerge from the Spring statement, but how it might affect you.

Why will cutting spending be the main approach?

While the government are desperate to avoid comparisons with the still-fresh-in-the-memory austerity era, the fact remains that cuts to public spending appears to be Ms Reeves’ best avenue to balancing the books.

That’s despite the end of year tax take soaring far higher than in 2023 as a result of “fiscal drag”: people being pushed into different tax brackets (and even losing benefits) because while inflation and salaries increase, the tax thresholds stay the same for years at a time.

Tom Goddard, a senior associate at Blick Rothenberg, said: “HMRC’s last tax statistics before the Spring Statement are looking optimistic for Rachel Reeves and the Treasury. Total receipts across the busy period of December to February were £11bn higher in 2024/25 than 2023/24. The increase is in part due to fiscal drag; despite income tax being collected via self-assessment being £388m lower in February 2025 than for the same month last year, total income tax receipts are actually up £1.65bn.

“This shows that as wages continue their upwards trend, everyday workers are being subjected to higher tax rates on their employment income, leaving them with less disposable funds.”

While an increase in taxes taken should therefore be a positive for the government’s spending power, it’s only one side of a complicated story.

As mentioned above, the increased borrowing leaves Ms Reeves with little margin if she doesn’t want to break her own fiscal rules – and some of October’s changes are not in play yet, such as National Insurance hikes.

All this combined means cuts are the route forward the chancellor is likely left with.

“Whilst the tax take has increased, the previous government’s NI cuts are also putting pressure on the public purse, and this government’s changes to employer NI have yet to take effect,” explained Danni Hewson, AJ Bell’s head of financial analysis.

“The government wants to spend more; on defence, on building the UK’s green infrastructure to power growth for generations to come. But with such geopolitical uncertainty, fiscal rules are important and breaking them would be costly. Not breaking them leaves the chancellor with few avenues to choose from, especially with her fiscal headroom probably in deficit.

“Promising not to increases taxes will mean even fewer choices and more cuts to public spending – and the increased likelihood that frozen tax thresholds will remain with us way beyond 2028.”

Isas, investing and the start of a sea-change?

One big area of debate recently has been around Individual Savings Acccounts (Isas) and in particular, cuts to the cash Isa.

If you want to know more on what Isas are and how to use them for investing, read here. But over the past couple of months, suggestions of cutting the cash savings version from a £20,000 per person limit down to £4,000 has been a huge discussion. It appears that cut won’t happen just now, but some variation of Isa reform is still on the agenda.

That’s as part of a wider push to increase the knowledge, appetite and ability of people to start (or resume) investing, which can offer better returns over the long term compared to saving cash.

Jordan Sinclair, president of Robinhood UK, said the nation needed “to boost the culture of retail investment” with Isa reform at the heart of that plan.

However, before encouraging people to invest more, it’s first important to put a knowledge base in place, with many unfamiliar with how to even start an investment journey, let alone know if it is right for their needs.

“The UK has a job on its hands more broadly to ensure that individuals are more educated [in investing]. Money is something that impacts all our lives, yet many consumers don’t have the foundational knowledge they need to manage it with confidence and make sound financial decisions.

“Without meaningful change sooner rather than later, the broader population could miss out on essential long-term wealth-building opportunities.”

Stamp duty’s impact

Increasing knowledge is vital, but if the government want more retail investors (private investors rather than companies or hedge funds) to participate then some more practical measures might be needed.

It has long been remarked, for example, that having to pay stamp duty of 0.5 per cent to buy shares in most UK companies is a cost which could be removed or at least lowered – aside from the added expense to purchase them, it compares unfavourably with buying overseas stocks where stamp duty is not payable.

And there’s a bigger knock-on effect too from the companies themselves, as Luke Bartholomew, deputy chief economist at aberdeen, told The Independent.

“Credible estimates suggest that abolishing stamp duty on shares could raise the level of UK GDP by between 0.2 and 0.7 per cent,” he said – which could mean an overall gain for the government.

“That’s because stamp duty raises the cost of capital for British firms. In other words, investment projects that would not go ahead with stamp duty in place because they are too expensive, suddenly become financially viable when the tax is removed.

“This means firms will invest more, deepening the economy’s capital base and increasing productivity. And this stronger economy, especially if the boost to growth is towards the upper end of the estimates, could actually result in a net benefit to the Treasury despite the loss of revenue from the tax.”

Housing and real estate

Build 1.5m homes to transform communities by the end of this parliament: just one of the government aims to ease a housing crisis. Labour have announced a £600m investment to train up 60,000 skilled construction workers to do so.

But there’s far more needed to push this level of action to actually happen, with stamp duty also rearing its head here.

Stacy Eden, head of real estate and construction at RSM UK, pointed out that “the [construction] industry sees additional tax restrictions as a key barrier to investment, and is bracing for incoming tax hikes. Nearly a third of businesses agreed that capital gains tax and stamp duty taxes should be reformed to increase liquidity in the market.”

While acknowledging it was “unlikely” any changes would be forthcoming in the Spring Statement, it was made clear by Mr Eden that laying out a route map for improvement was just as important.

“It’s crucial that the government acknowledges the challenges for real estate and construction businesses and provides an indication of future support and investment, to ensure the industry can achieve the targets set within the current parliament.

“While punitive tax measures are holding the industry back from long-term growth, we have recently seen the introduction of the Planning and Infrastructure Bill, which will remove red tape and help to resolve the supply and demand imbalance. If the government is serious about addressing the UK’s housing shortage, it’s essential this is complemented with property tax reform to make home ownership more accessible.”

What other options are there for Rachel Reeves?

With tax rises off the table this time around, Robert Salter, director at Blick Rotherberg, offered a few other ways Ms Reeves could give herself room to manoeuvre.

“There are a number of other significant changes which the Government could look to introduce which would not arguably break their election commitments, but could increase their tax take,” he said.

“One that would not break its election pledge is increasing the penalties associated with the late submission of self-assessment tax returns. The core late filing penalty of £100 has not changed since the late 1990s and could easily be increased to either £500 or £1,000. This might also help address the fact that around 1m tax returns in 2023/24 were not filed by the 31 January 2025 filing deadline.

“Elsewhere, she could look at reducing the tax relief on employee pension contributions so that tax relief is only available at a flat rate of 20 per cent or 25 per cent rather than at someone’s marginal tax rate, making employer pension contributions liable to employer National Insurance Contributions or introducing VAT on additional items such as private medical and dental treatment.”

While these might fit within the self-imposed rules, the fact is any further taking of money from people’s pockets will all be seen as a negative – so steering clear might still be only course to take.

“The reality is that many of these steps would be quite controversial and, arguably, the Government should not announce any tax changes to avoid further economic uncertainty,” Mr Salter added.