Spring Statement 2025: What it means for your business
Chancellor Rachel Reeves delivered her Spring Statement in the House of Commons on 26 March 2025. But what does it mean for you and your business? We’ve got you covered with our roundup!
Firstly, Rachel Reeves delivered on her promise to only have one major fiscal event (in the Autumn Budget) which meant there were no new major tax announcements in the Spring Statement.
This does still mean that measures such as the rise in Employers National Insurance announced in the Autumn Budget are still coming into force from 6 April 2025. As a reminder the rate of employers’ National Insurance will rise from 13.8% to 15%. In addition, the threshold at which employers start to pay NICs (known as the secondary threshold) will decrease from £9,100 to £5,000 per year. Smaller employers may be protected by the increase in the Employment Allowance from £5,000 to £10,500.
National Living Wage is also increasing to £12.21 for employees aged 21 and above.
These changes will increase payroll costs so budgeting for these and understanding the impact on your business’ costs is important.
Corporation Tax rates, VAT, Income Tax are all unchanged for 25/26.
Whilst there were no tax rises, there were a few updates which to have on your radar:
Making Income Tax Digital
Making Tax Digital for Income Tax Self-Assessment (MTD ITSA) has been expanded to include sole traders and landlords who have qualifying income over £20,000 from April 2028.
The legislation comes into force from April 2026 and will apply to sole traders and landlords with qualifying income over £50,000. Those earning over £30,000 will have to comply from April 2027.
Not sure what MTD ITSA is all about? We love Xero’s handy guide here.
If you are a director of a limited company, MTD ITSA doesn’t apply - unless you have separate self-employed income and/or property rental income.
Late Penalties
The government announced an increase in late payment penalties for VAT taxpayers, and Self Assessment income tax payers.
The new rates will be:
3% of the tax outstanding if overdue by 15 days
plus 3% where tax is overdue by 30 days
plus 10% a year if overdue by 31 days or more.
Be sure to start your returns and self-assessments early to avoid paying these harsh penalties. You can contact HMRC to put in place a Time to Pay arrangement if you know you will struggle to pay on time.
Crackdown on Tax Avoidance
The Government pledged to close the “tax gap” by by investing in HMRC’s debt collection and recovery efforts, closing in on promoters of tax avoidance, and tackling “phoenixism” (contrived insolvencies to evade tax and write off debts owed to others) amongst other measures.
This signals an increased focus on compliance and enforcement. Business owners should prepare for heightened scrutiny and ensure they have robust financial processes and support in place.
All this to state the obvious, which is of course to stay on the right side of HMRC.
High Income Benefit Charge (HICBC)
From summer 2025, employed individuals liable to the HICBC will be able to report their family’s Child Benefit payments through a new digital service and opt to pay HICBC directly through PAYE, without needing to register for Self Assessment.
Most of our limited company director clients already complete self-assessments as they take dividends and so will continue to report the HICBC in the return if they did previously. The new digital service may however be relevant/helpful to their employed partners if they are the higher earner in the household (as the higher-earner has to report and pay the HICBC).
Economic Outlook
Expected UK economic growth for 2025 has been halved from 2% to 1% by the government's official forecaster, the Office for Budget Responsibility, who also upped its inflation expectations from 2.6% to 3.2% (the government's target is 2%).
The Spring Statement confirmed major changes starting in April, along with stricter compliance requirements. We know small businesses are navigating a challenging landscape right now - but with the right preparation and really knowing your numbers, your business can thrive.
We’re providing tailored support to clients in understanding these updates and planning ahead, if you’d love to be one of them, we’d love to have an initial chat to discuss your business over a virtual coffee.
