Financial Planning – UK Spring Statement Summary & Next Steps

The UK Spring Statement 2026 was widely expected to be more of an economic update than a major fiscal event, and that proved to be the case. Chancellor Rachel Reeves focused on responding to the Office for Budget Responsibility’s revised forecasts rather than introducing new tax policies. For individuals and families engaged in long-term financial planning, the absence of surprise policy changes provides welcome stability. 

In a previous article, we explored several tax measures already scheduled for implementation from April 2026, including changes to inheritance tax relief on agricultural and business assets, higher dividend tax rates, adjustments to CGT and Business Asset Disposal Relief, and the reduction in Venture Capital Trust income tax relief. The Spring Statement itself introduced no major new tax measures, but it provides important economic context for how these previously announced changes may affect financial planning in the years ahead.

The Office for Budget Responsibility (OBR) reduced its GDP growth forecast for 2026 from 1.4% to 1.1%. This downgrade reflects weaker economic data at the end of 2025, rising unemployment, and subdued business sentiment.

The OBR also lowered its inflation forecast for 2026 from 2.5% to 2.3%, largely due to lower food and energy prices. However, this outlook has already been complicated by geopolitical developments. The US–Israeli strikes on Iran, which began in February 2026, have triggered sharp increases in oil and natural gas prices, which are likely to feed through to higher petrol prices and household energy bills.

If energy prices remain elevated, there is a risk that inflation could rise again while economic growth remains subdued. This scenario would place pressure on government finances and could delay expected interest rate cuts from the Bank of England. Government bond yields rose following the Spring Statement in anticipation of exactly this possibility.

Government borrowing is projected to fall from £153 billion in 2024/25 to £133 billion in 2025/26, before gradually declining to £59 billion by 2030/31. While this represents an improvement on earlier forecasts, the underlying fiscal position remains challenging.

Government debt stood at 93% of GDP at the end of 2024/25 and is expected to rise to 96% of GDP by 2028/29 before easing slightly. With debt levels already elevated, the government is likely to face continued pressure to maintain fiscal discipline in the years ahead.

Importantly, the Spring Statement introduced no major tax changes or policy shifts. Personal tax thresholds remain frozen, and no new taxes were announced.

This means the tax measures already scheduled for April 2026 remain firmly on track. Here’s a reminder of the key actions to take if you are affected:

From April 2026, a combined £2.5 million cap will apply to assets qualifying for 100% relief under Agricultural Property Relief (APR) and Business Property Relief (BPR). Any value above this level will receive 50% relief, creating an effective Inheritance Tax charge of 20% on the excess.

If you hold significant agricultural or trading business assets, consider the following steps:

1.      Confirm current valuations

Accurate valuations will become critical once a defined relief cap applies. Review the current value of land, trading businesses, and partnership interests to understand whether your estate may exceed the £2.5 million threshold.

2.      Assess liquidity for potential IHT liabilities

Where assets exceed the relief threshold, families should consider how any potential inheritance tax liability could be funded. Illiquid assets such as farms or private companies can create practical challenges if a tax bill arises on death. Possible approaches may include reviewing protection arrangements, establishing liquidity reserves, or considering ownership structures that allow greater flexibility.

3.      Review succession planning

The introduction of a relief cap may prompt a reassessment of succession strategies. This could involve exploring lifetime gifting, restructuring share ownership, or considering trust arrangements where appropriate.

4.      Review cross-border exposure

For internationally mobile families, agricultural and business assets located in the UK remain within the scope of UK inheritance tax. Cross-border families should ensure their wider estate planning arrangements reflect these rules.

Dividend tax rates will increase by two percentage points from April 2026, raising the ordinary rate to 10.75% and the higher rate to 35.75%.

For portfolio investors, this increases the marginal cost of dividend income. However, the impact is often more significant for business owners who extract profits through dividends.

Steps to consider include:

1.      Review how income is structured

Business owners may wish to reassess the balance between salary and dividends to ensure remuneration remains efficient within the updated tax framework.

2.      Consider pension contributions

Company pension contributions can form part of a tax-efficient remuneration strategy and may become more attractive as dividend taxation rises.

3.      Use family allowances effectively

Income splitting across spouses or family members, where appropriate, may help utilise multiple personal allowances and tax bands.

4.      Review dividend timing

The timing of distributions relative to personal tax thresholds may also influence overall tax exposure.

From April 2026, the Capital Gains Tax rate applying under Business Asset Disposal Relief will increase from 14% to 18%, while the lifetime relief limit remains £1 million.

For founders or shareholders considering a sale, advance planning becomes increasingly important. Key actions may include:

1.      Confirm eligibility for relief

Review whether shareholdings and business activities satisfy the qualifying conditions for Business Asset Disposal Relief.

2.      Review ownership structures

Family shareholdings or employee share schemes such as Enterprise Management Incentives (EMI) may play a role in structuring ownership ahead of a potential exit.

3.      Consider the timing of disposal

Where a business sale is anticipated, the timing of disposal relative to tax changes may affect the overall tax outcome.

4.      Seek advice before relocating

Relocating abroad as part of an exit strategy involves complex interaction with the UK’s Statutory Residence Test and temporary non-residence rules. Decisions about residency should reflect genuine commercial circumstances and require careful advice.

From April 2026, the upfront income tax relief available on Venture Capital Trust (VCT) investments will fall from 30% to 20%.

For investors already considering this strategy, the period before April 2026 may represent an important planning window. Possible steps include:

1.      Review whether VCTs remain suitable

Venture Capital Trusts involve higher-risk investments in smaller companies and are generally suitable only for investors who understand the associated volatility and liquidity constraints.

2.      Consider investing before the relief reduction

Where VCTs form part of an existing investment strategy, investing before the relief reduction allows investors to benefit from the higher rate of income tax relief.

3.      Compare alternative tax-efficient investments

Enterprise Investment Scheme (EIS) investments continue to offer 30% upfront income tax relief, although they involve different risk profiles and qualifying conditions.

As always, tax incentives should be viewed as one factor within a broader investment strategy rather than the sole reason for investing.

Before April 2027 - Estate And Pension Planning

Unused pension funds will generally be included in estates for inheritance tax purposes. This represents a significant change for individuals using pensions as part of their wealth transfer strategy.

Tax rates on savings and property income are also expected to rise by 2% across all bands, with a separate structure planned for UK landlords.

The Cash ISA limit for individuals under age 65 will reduce to £12,000.

Planning to do:

• Review pension death benefit nominations and beneficiary arrangements
• Assess how pensions fit within your broader estate planning strategy
• Consider whether current pension withdrawal strategies remain appropriate
• Reassess savings and investment income strategies ahead of the rate changes
• Review property investment structures for landlords

Before April 2028 - Property Tax Changes

A new High Value Council Tax surcharge is expected to apply to properties valued at £2 million or more.

Planning to do:

• Confirm current property valuations
• Assess potential future council tax exposure
• Consider ownership or long-term property strategy where appropriate

Before April 2029 - Pension Contribution Changes

From April 2029, only the first £2,000 of salary sacrificed for pension contributions will be exempt from National Insurance Contributions.

Planning to do:

• Review salary sacrifice arrangements
• Assess alternative pension funding strategies
• Consider accelerating pension contributions where appropriate

Longer Term – Ongoing Fiscal Drag

Personal allowances, higher-rate thresholds, and inheritance tax bands remain frozen until April 2031.

While tax rates themselves may not increase, frozen thresholds mean that rising incomes and asset values can gradually push more individuals into higher tax brackets.

Planning to do

• Review long-term tax projections
• Consider tax-efficient investment structures
• Revisit financial planning regularly as asset values grow

The Spring Statement delivered stability in policy but highlighted an uncertain economic environment. For individuals with business assets, agricultural land, significant dividend income, or cross-border exposure, the coming changes remain highly relevant.

The clear timeline of upcoming tax changes provides a strong foundation for structured financial planning. Acting sooner rather than later can help ensure strategies are implemented effectively and avoid last-minute decisions.

If you would like to discuss how these developments may affect your personal financial plans, please speak to your adviser or contact client services.