Spring Statement 2025: What Actually Changed for Your Pay

The Chancellor's Spring Statement 2025 wasn't dramatic. No headline-grabbing tax cuts, no new rates, no radical overhauls. But that's the problem. When everything stays frozen while wages go up, you quietly pay more tax each year without anyone technically raising your taxes.

Here's what you need to know.

The personal allowance is still frozen at £12,570

The amount you can earn before paying any income tax hasn't budged since 2021, and it's staying put until at least 2028. That matters because wages have risen with inflation, which means more of your income now falls into taxable bands.

This is fiscal drag. The government doesn't raise tax rates, but the freeze does the work for them. If you got a pay rise this year, a chunk of it is going straight to HMRC.

Tax bands haven't moved either

The income tax thresholds for 2025/26 remain:

• Basic rate (20%): £12,571 to £50,270
• Higher rate (40%): £50,271 to £125,140
• Additional rate (45%): over £125,140

Again, no change. But if your salary has crept above £50,270, you're now paying 40% on the excess. That's the whole point of fiscal drag — it pulls more people into higher bands without any legislation.

National Insurance: 8%, not 12%

Employee NI contributions for 2025/26:

• 8% on earnings between £12,570 and £50,270
• 2% on earnings above £50,270

Worth flagging: the employee NI rate dropped from 12% to 8% over the past couple of years. If you're still seeing 12% quoted somewhere, that's out of date.

Employer NI is a separate story — it went up to 15% on earnings above £5,000/year from April 2025, which doesn't come out of your pay directly but does affect hiring budgets.

Dividend and capital gains allowances stayed low

No restoration of the old, more generous allowances. For 2025/26:

• Dividend allowance: £500
• Capital gains tax allowance: £3,000

These used to be £2,000 and £12,300 respectively. If you're a limited company director or you hold investments, this matters. You'll pay tax on gains and dividends much sooner than you would have a few years ago.

Pension lifetime allowance is gone

The lifetime allowance was abolished in April 2024. The annual allowance stays at £60,000 (or 100% of your earnings, whichever is lower). If your total income exceeds £260,000, the annual allowance tapers down to a minimum of £10,000.

For most people, the £60,000 cap is what matters. You can also carry forward unused allowance from the previous three tax years.

What this actually means for your take-home pay

The headline is: you're probably paying more tax than last year on a similar salary, even though rates haven't changed. The frozen thresholds do the heavy lifting.

If you earned £35,000 last year and got a 4% pay rise to £36,400, every penny of that extra £1,400 is taxed at 20% plus 8% NI. That's £392 in tax and £112 in NI, leaving you with about £896 of your £1,400 rise.

Use our salary calculator to see exactly how the 2025/26 rates affect your pay.

What you can actually do about it

Three things worth checking:

1. Your tax code — make sure it's correct. An old code can mean you're overpaying.
2. Pension contributions — money you put into a pension comes off your taxable income. If you're near the 40% threshold, even small extra contributions save you real money.
3. Allowances — marriage allowance, savings allowance, and dividend allowance are all there. Use them.

The Spring Statement didn't change the rules. But with everything frozen, the rules are slowly changing you.