Spring Statement 2025

We were told that the Spring Statement, held by Chancellor of the Exchequer, Rachel Reeves on Wednesday 26 March 2025 was not an emergency budget, and wouldn’t contain any major tax announcements. In her own words, the Chancellor ‘remains committed 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’. The Chancellor was true to her word with no surprise taxation changes announced.  However, there is no escaping the fact that the economic outlook has changed since the Autumn budget, with announcements for an increase in defence spending and the Office for Budget Responsibility (OBR) cutting growth prospects to 1%, at least in the short term.

Despite the substantial increase to Employers’ National Insurance announced in the Autumn Budget, the OBR forecast very little headroom to meet the Chancellor’s ‘non-negotiable’ fiscal rules.  This remains the case after the Spring Statement, which included confirmation of further cuts to the welfare state and the civil service over and above those announced by Welfare Secretary, Liz Kendall, just last week. These are uncertain economic times and there will no doubt be speculation that the treasury might be coming back in the Autumn with revenue-raising measures.  The Chancellor will be hoping that the economy outperforms the forecasts and world events, and politics are more growth-friendly in the months ahead.

Alongside the spending cuts, The Chancellor announced a wave of measures designed to close the ‘tax gap’.  This will be done by clamping down on tax avoidance and increasing late payment penalties for VAT and Income Tax Self-Assessment taxpayers, as they join Making Tax Digital (MTD) for Income Tax from April 2025.  The new rates announced will be 3% of the tax outstanding where tax is overdue by 15 days, plus 3% where tax is overdue by 30 days, plus 10% per annum where tax is overdue by 31 days or more.  In addition, HMRC interest rates for late payments will be increased by 1.5% for all taxes from 6 April 2025.

Making Tax Digital (MTD) for Income Tax

The Chancellor also took the opportunity to confirm the rollout for the next stage of MTD for Income Tax. It will operate as follows:

• It will start from April 2026 for sole traders and landlords with qualifying incomes over £50,000.

• It will extend to those with qualifying incomes over £30,000 in April 2027

• It will extend again to those with qualifying incomes over £20,000 from April 2028.

The following groups will not be required to use MTD for Income Tax: customers who have a Power of Attorney, non-UK resident foreign entertainers and sportspeople who have no other income sources that count as qualifying income for MTD for Income Tax and customers for whom HMRC cannot provide a digital service.

Also, the following groups will not be required to join MTD for Income Tax over the course of this Parliament: ministers of religion, Lloyd’s Underwriters and recipients of the Married Couples’ Allowance and Blind Persons’ Allowance.

If you have any queries about announcements from the Spring Statement and the implications for you or your business, please don’t hesitate to contact us.