Spring Statement 2025
In the Spring Statement 2025, Chancellor, Rachel Reeves addressed the UK’s economic challenges amid global uncertainties and unveiled a series of measures aimed at stabilising public finances and promoting growth.
Tim Humphries, our Tax Partner added “In short, the Spring Statement 2025 was very much a non-tax event, but it was as we expected. There was, in fact, very little in terms of content that us, as tax experts, could get excited about. All we can do now is remind clients, and taxpayers generally, of the changes announced in the Autumn Budget, all of which were covered in our Budget Statement late last year” Download here.
In brief these updates included:
Employer’s National Insurance: an increase in rates from 13.8% to 15% as well as reducing the employer’s NI threshold from £9,100 to £5,000
Inheritance Tax: Business / Agricultural Property Relief is to be halved to 50% (i.e. 20% IHT) on qualifying assets exceeding £1m and AIM shares. IHT will also soon apply to undrawn pensions
Capital Gains Tax: rates were increased to 18% / 24%, and Business Asset Disposal Relief rates increased from 10% to 14% from 6 April 2025 onward, and again to 18% the following tax year.
So, what did we hear from the Chancellor yesterday?
Economic growth and fiscal outlook
The Office for Budget Responsibility (OBR) has halved the UK’s economic growth forecast for 2025 from 2% to 1%, citing global instability and rising borrowing costs. To address a projected £14 billion shortfall, the Government plans to implement spending cuts and enhance tax compliance measures.
Welfare and public spending cuts
The Chancellor announced significant reductions to welfare spending, including a £3.4 billion cut that will affect benefits such as Universal Credit. It has been suggested that these measures could potentially push approximately 250,000 individuals, including 50,000 children, into relative poverty. Additionally, plans include reducing the civil service headcount by 10,000 positions to achieve further savings.
Housing and infrastructure investments
Despite austerity measures, the government is allocating an additional £2 billion to the Affordable Homes Programme, aiming to construct 18,000 new affordable homes and support the broader goal of building 1.3 million homes by 2029-2030. This initiative is expected to contribute 0.2% to GDP.
Defence spending increase
In response to evolving global security concerns, an extra £2.2 billion will be invested in defence over the next year. This funding will support advancements in military technology with the Chancellor specifically mentioning AI and the extended use of drones.
Taxation and revenue measures
The government aims to raise £7.5 billion by enhancing efforts to combat tax evasion, including increased investment in HMRC’s capacity to address the issue. This initiative is expected to help restore public confidence in the fairness of the tax system.
R&D Projects
Claims for R&D Relief have seen numerous challenges in recent years so in order to provide taxpayers with greater certainty in this area, the Chancellor announced a consultation which will look at whether an updated advanced clearance mechanism might be beneficial for companies claiming R&D credits.
The roadmap includes certain commitments including
Cap the Corporation Tax rate at 25%
Maintain the Small Profits Rate and marginal relief at current rates and thresholds;
Maintain key features such as Full Expensing, the Annual Investment Allowance, R&D relief rates, and the Patent Box.
Venture Capital Reliefs. There were no changes announced to policy on VCTs, however, the Spring Statement notes do reference the Government’s continuing commitment to supporting VCT, EIS and EMI reliefs, and they are proposing the facilitation of roundtables with industry experts in April.
Increased penalties for late payments
To deter late tax payments, the government will raise penalties for taxpayers enrolled in the MTD program. The penalty rate will increase from 2% to 3%, affecting VAT taxpayers starting next month and self-employed individuals and landlords earning at least £50,000 annually beginning April 2026. Penalties will escalate after 15 and 30 days, with a 10% per annum charge for taxes overdue beyond 31 days.
Spring Statement 2025 and the expansion of MTD enrolment
The government confirmed that by April 2028, self-employed individuals and landlords with earnings of at least £20,000 will be required to join the MTD program. If you missed our webinar on the subject of MTD, you can find out more here
Spring Statement 2025 – enhanced tax compliance measurese
Additional initiatives include allocating more tax debts to private collection agencies and recruiting 1,100 new compliance staff. These efforts aim to strengthen tax collection and compliance, with the government anticipating £7.5 billion in extra tax revenue by 2029-30.
These measures reflect the government’s commitment to leveraging digital tools to improve tax compliance and reduce evasion.
If you would like to speak to a member of our team about anything mentioned in this article or anything covered by the Chancellor in her Spring Statement, please contact your usual RPGCC contact partner.
