On 3rd March 2026, Chancellor Rachel Reeves delivered the UK’s Spring Statement to the House of Commons. Unlike the Autumn Budget, the Spring Statement was not intended to introduce major tax or spending changes. Instead, it provided an update on the UK’s economic outlook and progress against the government’s fiscal targets.
This year’s announcement was deliberately low-key, with the focus placed on updated forecasts from the Office for Budget Responsibility (OBR) rather than new policy announcements.
Below we summarise the key economic updates and highlight tax measures that are scheduled to come into effect in the next few years.
Economic Outlook
Growth Forecasts
The OBR has revised its forecast for UK economic growth in 2026 down to around 1.1%, reflecting ongoing global uncertainty and slower economic activity.
Growth is expected to strengthen in later years, with the economy projected to expand by approximately 1.6% in both 2027 and 2028.
Inflation
Inflation is forecast to continue falling towards the Bank of England’s 2% target. The OBR expects inflation to average around 2.3% in 2026, before stabilising closer to the target in subsequent years.
Lower inflation should help ease pressure on household finances and borrowing costs.
Employment
The labour market is expected to weaken slightly in the short term, with unemployment forecast to peak at just over 5% before gradually declining towards the end of the decade. Younger workers were highlighted as being particularly affected by recent labour market pressures.
Public Finances
Borrowing
Public sector borrowing is now forecast to be around £18 billion lower than expected in the Autumn Budget. This improvement provides the government with slightly more fiscal flexibility.
Fiscal Headroom
The government’s fiscal “headroom” – the margin before breaching its self-imposed fiscal rules – has increased modestly. However, public finances remain sensitive to changes in economic growth or inflation.
Tax Burden
Despite no new tax increases being announced in the Spring Statement, the overall UK tax burden is still projected to rise to its highest level in the post-war period by the end of the decade. This is largely due to previously announced policies and frozen tax thresholds.
Cost of Living
The government highlighted forecasts suggesting that real household disposable income could increase over the coming years, with households potentially being more than £1,000 a year better off by the time of the next general election.
Falling inflation and lower interest rates are expected to gradually reduce pressure on household budgets and mortgage costs.
Previously Announced Tax Measures
Although the Spring Statement did not introduce new tax policy changes, a number of previously announced measures are scheduled to take effect in the coming years.
Changes taking effect in 2026/27
Key measures include:
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No change to personal allowances or main tax bands, which means more income may fall into higher tax bands as wages rise
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Dividend tax rates increasing from 8.75% to 10.75% (basic rate) and from 33.75% to 35.75% (higher rate)
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Winter Fuel Payments being withdrawn for individuals with income above £35,000
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Adjustments to Scottish tax bands
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Ongoing increases in company car tax rates
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Changes to tax relief for employee homeworking and medical expenses
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Increased limits for Enterprise Management Incentive (EMI), Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs)
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Restrictions on voluntary National Insurance contributions by non-UK residents
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Capital Gains Tax on Business Asset Disposal Relief increasing from 14% to 18%
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Inheritance Tax relief for agricultural and business property restricted to £2.5 million at 100% relief
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Changes to business rates, including revaluation and transitional relief measures
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Penalties for late corporation tax filings increasing
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Making Tax Digital for Income Tax becoming mandatory for self-employed individuals and landlords with income over £50,000
Measures planned for 2027/28
Further changes expected include:
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Higher tax rates on savings and rental income
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A restriction on the proportion of ISA allowances that can be held in cash (with exemptions for those over 65)
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Unused pension funds and pension death benefits potentially falling within the scope of Inheritance Tax
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Image rights payments linked to employment being treated as employment income
Longer-term measures
Measures scheduled for later years include:
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New Vehicle Excise Duty rules for electric vehicles
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A High Value Council Tax surcharge for residential properties valued above £2 million
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NIC charges on certain salary sacrifice pension contributions
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The abolition of low-value import relief for customs duties
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A requirement for VAT invoices to be issued electronically