The Chancellor has commissioned the OBR to publish an Economic and Fiscal Forecast on 26 March, and it’s been confirmed that this will be accompanied by a Statement to Parliament from her. The Budget Responsibility and National Audit Act 2011 requires the OBR to produce two outlooks each financial year, so the commissioning of this forecast in the spring was anticipated, with the other one expected to be delivered alongside a Budget in the Autumn.
When the forecast was announced in December, it reconfirmed the Chancellor’s commitment to one major fiscal event a year “to give families and businesses stability and certainty on upcoming tax and spending changes and, in turn, to support the government’s growth mission” – implying at the time that the intention was that this event would be little more than an economic update. There's been subsequent speculation on whether this will remain the case on 26 March, or if it will turn into a fiscal event with notable spending and tax policy changes.
As part of the Autumn Budget in 2024, like her predecessors before her, Rachel Reeves committed to self-imposed fiscal rules and the OBR forecast rounds provided to her in the run up to the 26 March will determine whether the Government is still on track to meet these. In the Autumn Budget 2024 there was limited fiscal headroom of £9.9 billion for the Government to meet its fiscal mandate to move the current budget into balance, so that day-to-day spending is met by revenues by 2029-30. Lots of variables – from growth to the cost of servicing government debt – feed into the OBR forecast, and in turn whether the Government will adhere to its fiscal rules.
Since the Forecast was announced on the 16 December the world hasn’t stood still and both the economic outlook and geopolitical landscape have changed. This has raised uncertainty on whether the Government will be able to continue to meet their fiscal rules, given there was only slim fiscal headroom to begin with.
The Government have repeatedly confirmed that the fiscal rules are non-negotiable. If the OBR forecast rounds indicate that these won't be met it suggests that the Chancellor may have limited options beyond spending cuts or tax rises to meet them. Current speculation in the press is centred around spending cuts being the first port of call, but the Government haven't ruled out tax rises.
While there remains uncertainty over whether the Spring Forecast could be more eventful than first anticipated, we’re not expecting the tax landscape to stand still in the short term, whatever happens on 26 March.
Just last week, the Finance Bill 2024-25, which brings in a number of the Autumn Budget announcements including the new residence-based regime from 6 April 2025, has had both its Report Stage and Third Reading in the House of Commons, meaning it's now substantively enacted for UK GAAP and IFRS purposes. The increase in employer NICs from 6 April 2025 is making its way through both Houses in a separate Bill.
The 2024 Autumn Budget also set out a number of consultations that would be published this year on proposed policy changes. We've seen some of these published in the last couple of weeks.
On 13 February a consultation was published on introducing e-invoicing in the UK. You can read more from our experts here.
On 27 February a technical consultation on the application for trusts of the proposed changes to Agricultural and Business Property Relief was published. You can read more on them and why they matter for businesses here.
With many more consultations promised for Spring 2025 in the Corporate Tax Roadmap released alongside the Budget, we could see the new Government continue the recently established tradition of holding a Tax Administration and Maintenance (TAM) Day. In recent years, this has provided a dedicated day to shine a spotlight on tax technical policy proposals and the release of consultations away from the glare of a fiscal event.
The consultations we're expecting shortly include:
Separately, ahead of a proposed revised regime for carried interest coming in from April 2026, which will be relevant for the private capital industry, the Government recently consulted on the introduction of further conditions for carried interest to be treated as qualifying (closed 31 January 2025) and has committed to a technical consultation on the draft legislation for the revised regime at some point in 2025. The expectation is this would most likely be published in the Summer on the annual ’Legislation Day’ which falls in mid-July.
Whatever the Spring Forecast brings, we'll be watching closely for any announcements on 26 March, whether that’s changes to the tax landscape, or greater clarity over the fiscal position as we head towards the Autumn Budget later in the year.
For more insight and guidance, get in touch with Abby Agopian.
