Spring Statement 2025 calculator – are YOU worse off after Rachel Reeves’ speech
MILLIONS of households will be wondering how the Spring Statement will impact their personal finances.
Chancellor Rachel Reeves revealed her plans for the nation’s finances today and while it didn’t contain any tax rises for households, we reveal how your wallet could still be hit.
The Spring Statement is typically more of an economic update rather than a way for the Chancellor to make major announcements.
But stealth tax rises could still cost households hundreds of pounds over the next few years.
Use our calculator, provided by Nous, below to see how it will affect your finances into the next financial year.
Enter your current annual income into the tool below and Nous’ calculator will determine the difference between the tax you’ll owe in the upcoming financial year and the amount you would have paid if income tax thresholds had risen in line with inflation.
Why will I pay more in tax?
Firstly, the personal allowance, along with the basic, higher, and additional rate income tax thresholds, will remain frozen until 2028.
The personal allowance – the amount you can earn each year without paying tax – currently stands at £12,570.
This means that any income above this threshold will be subject to income tax, starting at the basic rate of 20%.
Additionally, the threshold at which employees start paying National Insurance contributions will also remain frozen at £242 per week, further intensifying the financial strain on households.
As wages rise due to inflation or other factors, more individuals will find their incomes pushed into higher tax brackets.
This effect, known as “fiscal drag,” results in more people paying increased taxes, which means they have less disposable income.
Greg Marsh, SEO of Nous.co, said: “Working families are being hit by Rachel Reeves’ pernicious and invidious stealth taxes.
“The government is playing politics to avoid negative headlines around tax hikes. But make no mistake – taxes are increasing.
“For a typical working household, it’s going to cost hundreds of pounds over the next few years.
“This is the last thing people need after years of soaring bills.
“The pressure on household finances isn’t going anywhere, in fact it’s about to get worse.
“April price rises are going to leave households hundreds of pounds poorer once again this year – on top of the cost of higher taxes.”
Spring Statement - key points
KEY announcements from the Spring Statement:
- No new tax rises: The Chancellor ruled out further tax hikes and pledged to crack down on tax avoidance, aiming to raise an extra £1bn.
- Growth downgraded for 2025: The OBR halved its GDP growth forecast for next year from 2% to just 1%.
- Growth boost from planning reforms: New housing policies expected to raise GDP by 0.6 per cent over the next decade.
- House building surge: 1.3 million homes expected over five years, with construction hitting a 40-year high.
- £2.2bn extra for defence: Additional funding confirmed to help meet the 2.5 per cent of GDP defence target.
- £400m Defence Innovation Fund: Backing new tech like drones and AI for the front line.
- Welfare shake-up: Targeted employment support and welfare reform to reduce benefit spending.
- Civil service cuts: New voluntary exit schemes and AI tools to shrink Government.
How much will stealth tax rises cost you?
Currently, you pay no income tax on the first £12,570 of your earnings, referred to as the personal allowance.
Income above this amount, up to £50,271, is taxed at the basic rate of 20%.
Earnings between £50,271 and £150,000 are taxed at the higher rate of 40%.
Additionally, any earnings over £125,140 are taxed at the additional rate of 45%.
Traditionally, these thresholds increase annually in line with inflation; however, they were frozen by the previous Conservative government until 2028.
Workers also have to pay 8% National Insurance contributions on any earnings between £242 and £967 a week.
This means if you earn more than £12,570 a year, you’ll start paying NICs.
You pay mandatory National Insurance if you’re 16 or over and are either:
- An employee earning more than £242 per week from one job
- Self-employed and making a profit of more than £12,570 a year
Plus, you have to pay 2% on anything you earn over £967 a week – or £4,189 per month.
The exact amount you pay will depend on how much you earn, as it’s a percentage of earnings between these amounts.
You can check how much National Insurance you’ve paid by visiting gov.uk/check-national-insurance-record.
Could you be dragged into a higher tax band?
According to the latest data from HMRC, the number of higher-rate taxpayers exceeded five million for the first time in the 2022/23 tax year, as the freeze on tax thresholds pulled more earners into the higher band.
In 2022/23, 5.1million people were paying the higher rate of tax—an increase of 680,000, or 15.3%, compared to the previous year.
By contrast, five years earlier, the number of higher-rate taxpayers stood at 4.2 million.
What’s more, over nine million state pensioners are set to face a “retirement tax” next year, as rising state pension payments driven by the triple lock collide with frozen income tax thresholds.
Forecasts by Deutsche Bank suggest that the triple lock will push the state pension up by £600 (5.5%) in April 2026, bringing it to £12,631—exceeding the personal allowance threshold.
As a result, pensioners whose sole income is the full new state pension will be taxed on it for the first time
Additionally, around nine million pensioners in total are projected to pay income tax from April 2026, as tax is applied not only to the state pension but also to other sources of income, such as earnings from private pensions or employment.
Can you avoid being hit?
THERE are ways to mitigate stealth tax rises, writes James Flanders, chief consumer reporter.
If you get a pay rise that pushes you into a higher tax bracket, then you could consider ways to avoid being hit – but only if you can afford it.
You could pay more money into your pension to reduce your tax burden.
For example, some employers will allow you to pay into a workplace pension through salary sacrifice, which allows employers to reduce employees’ salary and pay the equivalent amount as pension contributions.
Basic-rate taxpayers get 20% pension tax relief, which turns an £80 contribution into £100.
You could also look at other salary sacrifice schemes, if they are useful to you.
Such as electric car or cycle to work schemes, these allow employees to reduce their tax home pay and stay under the tax thresholds and benefit from work perks.