Chancellor’s Spring Statement
– Smarter News 28/03/25

Against a backdrop of falling growth, increasing inflation rates and ongoing geopolitical changes the Spring Statement this week was marked as a “bigger than expected” event.  Even bigger than Rachel Reeves had anticipated at her maiden budget last October. To add into the mix the rumour mill has been active recently with various tax changes that could’ve been on the cards……would she relax some of the measures announced in October? Or would there be further tax rises?

The answer……and perhaps disappointingly, none of the above……from a tax and accounting point of view anyway there were no tax changes. Instead the headlines focus around the 15% reduction in costs of government, civil service cutbacks and the growth forecast reducing by 50%, from 2% to just 1% (it’s all about perspective!).

We will all have our differing opinions on what was said and how the countries money should be spent, but one opinion that seems to unite a lot of the business community and clients we speak to is that the governments growth agenda isn’t going to be easily achieved with upcoming tax changes from April ’25- more on that shortly.

Digging into the detail and small print of the Spring Statement, the following are the few key points that we think will affect clients of Smarter Accounting:-

• Increased funding for HMRC debt management teams from 2025/26 with 600 additional staff. This builds on the previous announcements from the Autumn budget. A welcome measure for some, but expect HMRC to get tougher with collecting outstanding taxes and accelerate the collection of tax debt.
• An additional 500 HMRC compliance staff, another measure to reduce the tax gap. Does this mean we will start to see more compliance checks coming? We can only hope that if so they are much quicker to resolve in this digital world, opposed to the previous paper and post compliance checks.
• Increased late payment penalties for VAT. These are increasing from 2% to 3% from April ’25, with a new 10% penalty if amounts are outstanding 31 days after they are due.
• Increased late payment penalties for Income Tax. Same increases as for VAT noted above, but introduced from 2026 linked to the migration to Making Tax Digital for Income Tax.
• Making Tax Digital for Income Tax is to be expanded to those with income over £20,000 from April 2028. See our recent blog on Making Tax Digital for Income Tax here > for more details on how this may affect you.
• Small Employer Compensation rate to increase from 3% to 8.5% for parental leave. Some relief at least, but only applicable in limited circumstances amongst our client base.
• High Income Child Benefit Charge (HICBC), options made available from Summer 2025 for employed individuals to have this collected through their employment income rather than completing a self-assessment tax return.

As you can see, nothing terribly exciting.

New tax year changes

It’s therefore a case of as you were and as we’ve already mentioned April 2025 sees a number of announcements from the Autumn budget come into force. If you want to read more detail on what is happening, please click on the link to our October 2024 Budget Blog here >. Otherwise, as a brief reminder the headline changes are:

• Minimum Wage – Main rate (over 21’s) increasing by 6.7%. Some rates for younger workers and apprentices will rise by up to 18%. Also, there will be a move to a single adult rate for over 18’s
• Personal Taxes – Income tax thresholds frozen until April 2028, from which point they will increase in line with inflation. Although there may be no changes in tax rates, tax thresholds remaining static in periods of increased inflation as we’ve seen over the last couple years are a clear tax increase on the working man.
• National Insurance – No change for employees, but for employers the rate will increase to 15% (from 13.8%). In addition, the point at which employers start paying National Insurance will be reduced to £5,000 (from £9,100).
• Capital Gains Tax – Many changes already taken place but from April 6^th the Business Asset Disposal Relief rate will increase to 14% (from 10%) and it will further increase to 18% from April 2026
• Inheritance Tax – Rates frozen and threshold frozen until 2030. From 2026 Business & Agricultural Property Relief will be restricted to 50% for assets over £1 million. Inherited pensions to be brought into inheritance tax from April 2027
• Business Rates – Retail, hospitality and leisure discount will be reduced to 40% from April. Government still promising Business Rate reform from April 2026
• Corporation Tax – No changes
• Stamp Duty – From April only the first £125,000 will be free from Stamp Duty
• Double Cab Pickups – To be treated as cars for Capital Allowances and Benefit in Kind Purposes (new vehicles only) from April 2025. Strangely VAT treatment remains the same
• Furnished Holiday Lets – The previous advantageous tax position for Furnished Holiday lets will be abolished from April 2025.

The above are the main headline changes coming into effect from April. For a lot of us, there are a lot of changes that will have a significant impact on our finances both in terms of tax and with various increases in council tax bills/utilities as well. As always, Smarter Accounting are on hand if you want to discuss the tax changes that impact you in more detail. Please contact your normal contact if you have any questions.

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Best wishes, take care