Legislation
The Spring Statement 2025: What you need to know
Date
March 2025
Summary
While this years Spring Statement might not have delivered any surprise announcements for payroll teams, that’s not to say there’s nothing to take note of.
Chancellor Rachel Reeves confirmed that no new changes to tax or National Insurance will be introduced until the next Autumn Budget in October 2025 – offering some welcome certainty for businesses planning their year ahead.
But while the Spring Statement didn’t bring fresh payroll reform, it did reinforce the importance of staying prepared. Here’s a reminder of the key updates that will be going ahead from April 2025 and some key takeaways from the Statement.
No further changes to Income Tax or National Insurance
Back in the Autumn Budget, the Chancellor announced a reduction in the main rate of employee National Insurance from 10% to 8%, effective 6 April 2025 – alongside a cut in the self-employed rate from 8% to 6%.
In the speech, it was confirmed that there will be no additional changes to tax or NICs until at least October, giving payrollers a bit of breathing room to prepare and implement the updates already announced.
If you’re looking for a full breakdown of NIC and tax changes coming into effect this April, head over to the Payroll & HR rates for 2025-26.
Employment Allowance remains unchanged
The Statement didn’t introduce any tweaks to Employment Allowance thresholds, meaning the current setup remains in place. That said, it’s still a good time to reassess your businesses eligibility.
Slower economic growth ahead
The Office for Budget Responsibility (OBR) revised its growth forecast for 2025, lowering it from 2% to just 1%. While this doesn’t directly impact payroll processing, it’s something for employers to keep in mind when it comes to forecasting pay rises, recruitment activity, or investment in workforce tools and technology.
Public sector reforms
One of the more notable announcements was the government’s renewed focus on transforming the public sector. A new £3.25 billion transformation fund has been pledged to modernise public services, with an emphasis on embracing digital technology and AI to boost productivity and cut long-term costs.
While the implications for payroll teams may not be immediately clear, any shift towards automation and digital delivery could influence the types of systems and support public sector organisations require in the years ahead.
Alongside this, £150 million has been earmarked for civil service exit schemes, with the aim of cutting administration costs by 15% by the end of the decade. This could result in around 10,000 job cuts across the public sector, signalling potential restructuring and a drive for leaner operations.
For HR and payroll professionals supporting public sector clients or operating within these organisations, this may prompt a need for increased agility around redundancy processing, headcount planning, and workforce data management.
Public spending cuts
In a move already generating headlines, the Chancellor announced significant cuts to public spending, including a reduction in welfare budgets.
While the details are still unfolding, this signals a shift in how public funds will be allocated – potentially impacting public sector employers or businesses working closely with government contracts. HR and payroll teams may want to monitor any knock-on effects on employment initiatives or benefits funding.
contracts. HR and payroll teams may want to monitor any knock-on effects on employment initiatives or benefits funding.
A nod to defence investment
One of the few areas seeing increased investment is defence, with additional funding set aside despite wider budget tightening. While not directly payroll-related, this might offer new opportunities for businesses operating in or supplying to this sector.
The grey areas
Several issues flagged by leading HR and employment bodies – including the CIPD – didn’t make it into the announcement.
The CIPD had urged the government to tackle the growing ‘mismatch’ between workers’ qualifications and the roles they’re placed in – a trend shown to impact motivation, satisfaction, and long-term earning potential. Yet, there was no mention of this challenge in the speech.
Likewise, calls for an apprenticeship guarantee – one that would ensure all young people aged 16 to 24 are offered placements – were not taken forward, despite strong employer support and evidence that such schemes can improve mental health, reduce economic inactivity, and close growing skills gaps.
There was also no movement on improving people management and leadership across the UK workforce – something many believe is key to unlocking productivity. Research from the London School of Economics has repeatedly linked better management practices with more successful technology adoption, yet support in this area remains limited.
Businesses hoping for more accessible government-funded support in these areas will have to wait until the next Autumn Budget at the earliest.
There was also no movement on improving people management and leadership across the UK workforce – something many believe is key to unlocking productivity.
Research from the London School of Economics has repeatedly linked better management practices with more successful technology adoption, yet support in this area remains limited.
Businesses hoping for more accessible government-funded support in these areas will have to wait until the next Autumn Budget at the earliest.
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