Unpacking the 2025 Spending Review: What Rachel Reeves’ announcement could mean for your finances

Following Rachel Reeves’ 2025 Spending Review, you may be wondering how the government’s financial plans could affect your daily life and long-term security.

By getting to grips with the key takeaways, you could have a clearer picture of what lies ahead.

Here, we’ll dive into how changes to public spending, tax policy, and investment priorities for the government could influence your personal finances.

The review focused on growth and key services

The 2025 Spending Review signals a strategic shift in the way the UK government intends to spend its money. The primary focus appears to be on driving economic growth and boosting key public services.

While overall departmental spending is set to grow at 2.3% a year over economy-wide inflation, it’s worth noting that this is slower than the previous parliament, when spending growth was 3.6%.

The primary beneficiaries of this increased day-to-day spending include:

• Health and social care services. The NHS is set to receive a significant boost, with a 3% real-term annual growth in day-to-day spending. This equates to £29 billion for budgets by 2028/29. The goal here is to improve productivity, invest in digital growth, and support the training of more GPs and mental health staff.
• The defence sector. Defence spending is set to rise, reaching 2.6% of GDP by 2027. This aims to provide long-term certainty for the sector and is considered a driver of industrial growth and innovation.
• Public education. Schools are set to receive a £410 million increase in their annual budget, with specific funding set aside to expand the offering of free school meals for all children whose parents claim Universal Credit.

These increases in public spending could improve the quality of life for many individuals across the UK, from social sector workers to students in deprived situations.

However, these benefits come at the expense of other day-to-day spending cuts in areas such as transportation, agriculture, and Whitehall administrative budgets. According to the government, these will see an 11% cut by 2028/29.

While local governments will see increases in their spending power, a significant portion of this is likely to come from an increase in Council Tax, which may affect your monthly outgoings. The increase could be as much as 5% in your area, and the government says this money will go to supporting local services, including policing.

The increased investment in the NHS, particularly through digital investment and GP training, could fund efficiencies and reduce waiting times.

Finally, a significant commitment of £39 billion over the next decade has been allocated to social and affordable housing, with an additional target of 1.5 million new homes built by 2029. While this may not directly apply to you, it could lead to a more stable housing market overall as increased supply means house prices tend to stay down.

Taxes are likely to fund the proposed changes, so your bill could rise

While the Spending Review primarily outlines how the government intends to spend its money, the scale of these commitments does suggest that there may be implications for future tax policy.

Though no specific tax increases have been announced yet, experts suggest that rises may be necessary to help fund these ambitious plans.

Potential areas for future tax changes could include:

• Higher personal or corporate taxes. The government could introduce these if economic growth doesn’t offset the increased expenditure.
• Capital Gains Tax and Inheritance Tax reforms. The government may revisit Capital Gains Tax (CGT) and Inheritance Tax (IHT) as part of a broader fiscal tightening.
• Adjustments to tax reliefs and allowances. Freezing or adjusting existing reliefs could increase government revenue without headline rate changes.
• Council Tax increases. As mentioned, increases in council tax are expected to play a role in funding local services.

It’s important to remember that tax policy can change, but nothing is set in stone. There’s no need to panic, and if any of the above does come into effect, we are here to support you.

Get in touch

Overall, the 2025 Spending Review presents a mix of targeted investments into important areas, but potential tax changes on the horizon mean that proactive financial planning is more important than ever.

By understanding what’s happening in the economy and adapting your financial strategy as needed, you can better navigate the landscape ahead and make informed decisions about your money.

If you’d like to discuss your portfolio or simply want to understand more about how the Spending Review could affect you, email enquiries@jesellars.co.uk or call 01934 875 919.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate tax planning.