Spring Statement reaction – The devil is in the detail!
5th Mar 2026
As anticipated, the Chancellor’s 2026 Spring Statement was a rather quiet affair on fiscal matters and the emphasis was very much on the government’s economic plan and stability. The statement billed as “the right economic plan for Britain” is overshadowed by geo-political events including the intensifying conflict in Iran.
The underlying message delivered in the Spring Statement is that the country is turning a corner, and that the Chancellor’s economic plan is the right one! Time will be the judge of that.
The OBR’s 2026 economic and fiscal outlook shows that inflation, borrowing and debt interest are all falling while investment is rising. Labour market conditions continue to loosen so the central forecast is for the unemployment rate to rise and peak in 2026 and decline thereafter.
It is forecast that slowing wage growth is expected to result in inflation falling from 3.4% in 2025 to 2.3% in 2026 and 2.0% cent from 2027 onwards.
Borrowing is expected to be £6 billion lower this year compared to November 2025 and headroom against the stability rule has increased to almost £24 billion.
The Chancellor said virtually nothing on tax policy changes, however, the OBR’s report provides some interesting insights on the impact of the Chancellor’s previously announced tax policies on the staggering tax receipts.
Key highlights include:
Self-assessed (SA) Income Tax is forecast to raise £56 billion in 2025-26, a 16% increase on 2024-25. Receipts are then forecast to rise sharply to £64 billion in 2026-27, driven mainly by reforms to the non-domicile tax regime.
Onshore corporation tax is expected to raise £97 billion in 2025-26, an increase of 6.4% compared to the prior year. This is then forecast to rise to £123 billion by 2030-31. This increase, as a share of GDP, is driven by the forecast for a rising profit share in the economy, strong equity price growth boosting capital gains charges to corporation tax, and measures announced in the November 2025 Budget. There has also been a significant increase in HMRC tax enquiries resulting in additional tax receipts for the treasury, a trend that I expect will continue given the ever-increasing tax compliance and reporting burdens being placed on businesses.
The impact of geo-politics on the treasury finances can be demonstrated by the reduced tax receipts under Pillar 2. The Pillar 2 Global Minimum Tax framework is now expected to raise an average of £1.6 billion a year over the forecast, a decrease of £1.2 billion a year relative to November. I suspect this decrease is partly down to concessions made for US parented groups under Pillar 2 to avoid further antagonising the US and ward off retaliatory actions.
Capital Gains Tax (CGT) is forecast to raise £22 billion in 2025-26, around a 60% increase from 2024-25. This is due to an increase in the disposal of assets in 2024-25 to benefit from lower rates ahead of anticipated CGT policy changes at the October 2024 Budget, with the CGT on these disposals mainly paid in January 2026. Receipts are then forecast to rise to £35 billion in 2030-31.
Inheritance Tax (IHT) receipts are forecast to be £9 billion in 2025-26, and expected to rise to £15 billion in 2030-31, driven by increasing equity and house prices, a growing proportion of deaths subject to Inheritance Tax, and the impact of policies announced in the October 2024 Budget. This includes the impact of the unpopular IHT changes made for farmers. The IHT receipts would have been even higher not for the government’s recent U-turn on thresholds!
Business rates are expected to be £34 billion in 2025-26 increasing to £42 billion by 2030-31. This will be fuelled by the increase in the standard multiplier and less generous reliefs for retail, hospitality and leisure (RHL) sectors. These are partially offset by the November 2025 Budget package of measures capping bill increases, and the increase in reliefs for pubs and music venues announced in January. Inevitably increasing business costs will be passed onto the consumer or businesses closing.
The government’s economic plan for stabilising the country’s finances is predicated on significant tax receipts and reduced spending. I expect that the robustness of the government’s strategy will be tested over the coming weeks and months based on the Iran conflict and subsequent impact on fuel prices.
