Spring Budget 2025 Analysis: No Tax Changes, OBR Forecasts & What It Means for Your Pay
Chancellor Jeremy Hunt delivered the Spring Budget on 26 March 2025. Unlike the Autumn Budget which brought sweeping changes, this was largely a holding exercise — income tax rates, National Insurance, and ISA limits were all unchanged. This analysis covers what stayed the same, what the OBR forecasts mean for UK households, and the ongoing silent tax rise from frozen thresholds.
Spring Budget 2025 at a glance
- Date: 26 March 2025
- Income tax rates and bands: unchanged — personal allowance £12,570, higher-rate threshold £50,270
- Employee NI rate: maintained at 8% (12% cut from January 2024 retained)
- Income tax threshold freeze: confirmed to continue until April 2028
- ISA allowance: unchanged at £20,000
- Fuel duty: freeze extended for a further year (14th consecutive year with no rise)
- OBR GDP growth forecast 2025: 1.0% (down from 1.5%)
A quiet Budget: why so little changed in Spring 2025
The Spring Budget 2025 was delivered against a backdrop of political uncertainty. With a General Election expected in late 2024 or early 2025, Chancellor Jeremy Hunt had limited room to manoeuvre and little appetite for major pre-election tax changes that could unravel quickly if the government changed.
Instead, the Budget largely confirmed existing policy — the NI cut from January 2024 remained in place, income tax thresholds stayed frozen, and new spending commitments were modest. The headline message from the Treasury was stability rather than change.
This stands in contrast to the Autumn Budget 2024, delivered by the new Labour government in October 2024, which brought substantial changes including employer NI rising to 15%, Capital Gains Tax increases, and a higher SDLT surcharge on additional properties.
What stayed the same: the full “no change” list
The following were explicitly confirmed as unchanged at the Spring Budget 2025:
| Tax or allowance | Level (unchanged) | Notes |
|---|---|---|
| Personal allowance | £12,570 | Frozen since April 2021; continues to April 2028 |
| Higher-rate income tax threshold | £50,270 | Frozen since April 2021; continues to April 2028 |
| Basic income tax rate | 20% | No change |
| Higher income tax rate | 40% | No change |
| Additional income tax rate | 45% (above £125,140) | No change |
| Employee NI primary rate | 8% (on £12,570–£50,270) | Maintained from January 2024 cut |
| Employee NI above £50,270 | 2% | No change |
| ISA allowance | £20,000 | No change; Lifetime ISA £4,000, Junior ISA £9,000 |
| Pension annual allowance | £60,000 | No change |
| CGT annual exempt amount | £3,000 | Already reduced from £6,000 in 2023/24 |
Employee NI maintained at 8%: the January 2024 cut confirmed
The most important employment tax decision in the Spring Budget 2025 was the confirmation that the employee National Insurance cut from January 2024 remained in place with no reversal or further change. In January 2024, the main employee NI rate was cut from 12% to 10%, and then in April 2024 it was reduced again to 8%.
This means a worker earning £35,000 pays around £750 less in National Insurance per year compared to someone on the same salary before the January 2024 cut. The Spring Budget 2025 confirmed this saving continues into 2025/26.
There had been pre-Budget speculation that the incoming (or anticipated) Labour government might reverse the NI cut as part of fiscal tightening. No such reversal was announced at the Spring Budget 2025, and the subsequent Autumn Budget 2024 also left employee NI rates unchanged (though employer NI rose significantly).
Annual NI saving from the 8% rate vs old 12% rate
| Gross salary | Employee NI at old 12% | Employee NI at 8% | Annual saving |
|---|---|---|---|
| £20,000 | £897 | £598 | £299 saved |
| £30,000 | £2,097 | £1,398 | £699 saved |
| £40,000 | £3,297 | £2,198 | £1,099 saved |
| £50,000 | £4,497 | £2,998 | £1,499 saved |
| £60,000 | £4,697 | £3,198 | £1,499 saved |
NI calculated on earnings between £12,570 and £50,270 at 12% vs 8%. Above £50,270 rate is 2% in both cases and unchanged. Figures rounded to nearest £.
See your exact take-home pay for 2025/26
Our take-home pay calculator uses the current 8% NI rate and frozen income tax thresholds.
Open take-home pay calculator →The silent tax rise: frozen thresholds and fiscal drag
While the Spring Budget 2025 announced no new tax rises, the confirmation that income tax thresholds remain frozen until April 2028 ensures that tax revenues continue to rise in real terms without any headline rate change. This mechanism — known as fiscal drag — is the defining tax story for most UK workers in the mid-2020s.
With the personal allowance stuck at £12,570 since April 2021, a worker whose salary rises from £30,000 to £35,000 over that period pays income tax on a progressively larger share of their earnings. The tax system treats each pound of nominal pay growth as taxable income, even if much of that growth is simply keeping pace with inflation.
The OBR estimates that the threshold freeze, across all the years it remains in place, represents the largest stealth tax in modern UK fiscal history. By April 2028, around 3.7 million more people will be paying income tax than in April 2021, and around 800,000 more will have become higher-rate taxpayers — all without a single percentage-point change in the published rates.
How fiscal drag affects take-home pay: worked examples
The table below compares the income tax bill for the same nominal salary in 2021/22 (before the freeze) and 2025/26 (with frozen thresholds). If your salary has increased in cash terms, your real tax burden is higher than the headline rate suggests.
| Gross salary 2021/22 | Equivalent 2025/26 salary (with 15% wage growth) | Extra income tax paid due to frozen thresholds |
|---|---|---|
| £25,000 | £28,750 | ~£750 more |
| £35,000 | £40,250 | ~£1,050 more |
| £45,000 | £51,750 | ~£1,670 more |
| £60,000 | £69,000 | ~£2,250 more |
Illustrative. Extra tax reflects thresholds frozen at 2021/22 levels vs hypothetical indexation to CPI. Actual impact varies with exact salary growth. England and Northern Ireland only.
Fiscal drag note
The Spring Budget 2025 confirmed that fiscal drag will continue until at least April 2028. If you receive a pay rise, calculate your new take-home pay carefully — the marginal benefit of a nominal wage increase is lower than you might expect when thresholds are frozen.
OBR economic forecasts: growth cut to 1.0% for 2025
The Office for Budget Responsibility (OBR) published updated economic forecasts alongside the Spring Budget 2025. The headline figure was a downgrade to GDP growth: the OBR projected the UK economy would grow by just 1.0% in 2025, down from its previous forecast of 1.5%.
The OBR cited several factors behind the downgrade:
- Interest rates remaining elevated: the Bank of England had kept the base rate at 5.25% for longer than previously expected, dampening mortgage affordability and business investment
- Subdued consumer spending: real household disposable incomes remained under pressure from high inflation and sticky mortgage costs
- Global trade uncertainty: slower growth among major trading partners and ongoing geopolitical disruption weighed on UK export prospects
The OBR forecast growth would recover to around 1.8% in 2026 and 2.0%–2.1% from 2027 onwards, though these medium-term projections carry wide uncertainty bands. Inflation was expected to remain above the 2% target through much of 2025 before falling back towards target in 2026.
OBR key forecasts (Spring Budget 2025)
| Indicator | 2025 forecast | 2026 forecast | Previous 2025 forecast |
|---|---|---|---|
| GDP growth | 1.0% | 1.8% | 1.5% |
| CPI inflation | ~2.8% | ~2.1% | ~2.5% |
| Unemployment rate | ~4.5% | ~4.3% | ~4.2% |
| Public sector net borrowing | ~£87bn | ~£80bn | ~£83bn |
OBR Spring Budget 2025 projections. Figures are approximate central forecasts; actual outcomes vary. GDP at market prices.
Expected vs what happened: what markets and analysts anticipated
In the weeks before the Spring Budget 2025, financial commentators and tax analysts had speculated on several possible measures. Here is how those expectations compared to what was actually announced:
| What was expected / rumoured | What happened |
|---|---|
| Further employee NI cut to 6% | No further cut — rate held at 8% |
| Extension of income tax threshold freeze beyond 2028 | Freeze confirmed to April 2028 as previously legislated; no extension announced |
| ISA reform (consolidation or limit cut) | No ISA changes — £20,000 limit maintained |
| Fuel duty rise (first since 2011) | Freeze extended for another year — no rise |
| New childcare or household support measures | No significant new household support beyond existing schemes |
| Capital gains tax changes | No CGT changes at this Budget (changes came in Autumn Budget 2024) |
| Business rates reform | No substantive reform announced; existing reliefs maintained |
Take-home pay 2025/26: minimal direct impact from this Budget
Because the Spring Budget 2025 made no changes to income tax rates, NI rates, or the personal allowance, your take-home pay in 2025/26 is not directly affected by this Budget. The key driver of any change to take-home pay between 2024/25 and 2025/26 is movement in your gross salary, not a Budget change.
The table below shows approximate take-home pay for 2025/26 for an English-resident employee with no student loan or pension contributions. These figures reflect the existing NI rate of 8% and frozen income tax thresholds — unchanged from before and after the Spring Budget 2025.
| Gross salary | Income tax | Employee NI (8%) | Take-home pay | Effective rate |
|---|---|---|---|---|
| £20,000 | £1,486 | £598 | £17,916 | 10.4% |
| £25,000 | £2,486 | £998 | £21,516 | 13.9% |
| £35,000 | £4,486 | £1,798 | £28,716 | 17.9% |
| £50,000 | £7,486 | £2,998 | £39,516 | 21.0% |
| £75,000 | £17,432 | £3,558 | £54,010 | 28.0% |
| £100,000 | £27,432 | £4,058 | £68,510 | 31.5% |
England 2025/26. Personal allowance £12,570. Basic rate 20% to £50,270; higher rate 40% to £125,140. Employee NI 8% on £12,570–£50,270, 2% above. No pension contributions, student loans, or benefits in kind. Effective rate = total deductions as % of gross salary. Figures approximate.
Model your take-home pay
Add pension contributions, student loan plan, and other deductions to get a precise figure.
Open take-home pay calculator →Fuel duty: freeze extended for another year
One of the few concrete decisions in the Spring Budget 2025 was the extension of the fuel duty freeze. Fuel duty has not risen since March 2011 — a streak now extended to 14 consecutive years. The temporary 5p per litre cut introduced in March 2022 was also retained, meaning the effective rate remains 52.95p per litre for petrol and diesel.
For a typical driver covering 8,000 miles per year in a 40mpg car, the freeze saves an estimated £100–£150 per year compared to if duty had risen with inflation since 2011. The total cost to the Exchequer of freezing and cutting fuel duty is estimated at around £5 billion per year.
Critics argue the continued freeze disproportionately benefits higher-income households (who drive more) and works against climate targets. Supporters note that fuel costs are a significant cost for rural households and businesses with no viable public transport alternatives.
Context: how Spring 2025 compares to the Autumn Budget 2024
If you are trying to understand the full picture of UK tax changes in 2024–2025, it helps to see Spring 2025 and the Autumn Budget 2024 together. The Autumn Budget (30 October 2024) was the major fiscal event of that cycle — the Spring Budget 2025 added almost nothing new.
| Area | Spring Budget 2025 (26 Mar 2025) | Autumn Budget 2024 (30 Oct 2024) |
|---|---|---|
| Income tax rates | Unchanged | Unchanged (but thresholds re-confirmed frozen) |
| Employee NI | Maintained at 8% | Unchanged at 8% |
| Employer NI | Unchanged at 13.8% | Raised to 15% from April 2025; threshold cut to £5,000 |
| CGT rates | Unchanged | Raised to 18%/24% on most assets from 30 Oct 2024 |
| SDLT additional surcharge | Unchanged | Raised to 5% from 31 Oct 2024 |
| ISA allowance | Unchanged at £20,000 | Unchanged at £20,000 |
| Fuel duty | Freeze extended | Freeze extended |
In short: if you want to understand what has materially changed for your tax bill, the Autumn Budget 2024 analysis is the page to read. The Spring Budget 2025 simply confirmed the status quo.
This article is general information, not tax or financial advice. Figures apply to the 2025/26 UK tax year for England and Northern Ireland unless stated otherwise. Scotland and Wales have devolved income tax powers with different rates and bands. If these changes materially affect your tax position, consider consulting a qualified accountant or tax adviser.
Frequently asked questions
Did the Spring Budget 2025 change income tax rates or thresholds?
No. The Spring Budget on 26 March 2025 made no changes to income tax rates or thresholds. The personal allowance remained at £12,570 and the higher-rate threshold at £50,270. Both thresholds remain frozen at their 2021/22 levels and are not scheduled to rise until April 2028. This means fiscal drag continues to push more workers into higher tax bands as wages rise with inflation.
Is employee National Insurance still 8% after the Spring Budget 2025?
Yes. The employee NI rate of 8% on earnings between £12,570 and £50,270, introduced in January 2024, was maintained in the Spring Budget 2025 with no further changes. The rate above £50,270 remains 2%. Chancellor Jeremy Hunt confirmed the cut from the previous 12% and 10% rates would not be reversed.
What did the Spring Budget 2025 say about fuel duty?
The Spring Budget 2025 extended the freeze on fuel duty for a further year. Fuel duty has been frozen since March 2011, and the temporary 5p per litre cut introduced in March 2022 was also retained. This is the fourteenth consecutive year fuel duty has not risen. The continued freeze provides some relief for drivers, though it represents a cost to the Exchequer of several billion pounds per year.
What were the OBR economic forecasts in the Spring Budget 2025?
The Office for Budget Responsibility (OBR) forecast GDP growth of 1.0% for 2025, a downgrade from its earlier projection of 1.5%. Growth was then expected to pick up to around 1.8% in 2026. The OBR cited continued high interest rates, subdued consumer spending, and global trade uncertainty as headwinds. Inflation was forecast to remain above the Bank of England's 2% target through much of 2025 before easing.
How does the Spring Budget 2025 affect my take-home pay?
For most employees, the Spring Budget 2025 had no direct impact on take-home pay. Income tax rates, the personal allowance, and employee NI rates were all unchanged. However, if your salary has increased since April 2021, the continuing freeze on income tax thresholds means more of your income is taxed — this is fiscal drag. A worker earning £50,000 today pays more income tax in real terms than a worker earning £50,000 in 2021 would have, even though the headline rates are the same.
Useful calculators
Take-Home Pay Calculator
Net pay after income tax and NI at the maintained 8% rate.
Income Tax Calculator
Model the fiscal drag impact of frozen thresholds on your bill.
National Insurance Calculator
See your NI bill at the current 8% employee rate for 2025/26.
Autumn Budget 2024 Analysis
The Budget with real changes: employer NI 15%, CGT 18%/24%, SDLT 5%.