In the build up to the Spring 2025 Statement we were made aware that it would be all about tough choices, securing the future and balancing the books, with most of the noise surrounding public spending.
Vowed in Labour’s manifesto was their pledge to not change Income Tax, National Insurance, VAT or Corporation Tax rates so the spotlight on the tax front had been rather dim leading up to Wednesday. True to her word, Rachel Reeves made it clear early on in her speech that the Statement did not contain ‘any further tax increases’.
As in October 2024, the speech centred around spending proposals so we are left with diving into the detail contained within the Treasury report.
Key takeaways from the Statement
- No further increase to tax rates.
- Increased public spending focusing on drive to improve transport, education and healthcare infrastructure.
- Welfare cuts.
What’s coming next week?
Off the back of the significant changes announced in the Spring and Autumn 2024, it has been difficult to foresee what else might be announced in this Spring 2025 Statement.
With this in mind, it came as no surprise that no major tax changes were announced in Wednesday’s Statement. It is therefore important to recap the changes coming into effect as of Sunday next week:
- Employers will pay a higher rate of National Insurance on wages, and the threshold for paying starts at a lower level.
- Business Asset Disposal Relief (BADR) (Formerly known as Entrepreneurs’ Relief) taxed qualifying gains at 10% up to £1 million. This rate is increasing to 14%.
- The thresholds for where Stamp Duty Land Tax becomes payable are decreasing.
- The non-domiciled tax regime is being abolished and replaced with a new residence scheme.
- Van benefit rates and company car fuel charges are increasing.
- Double Cab Pickups will be treated as cars for new purchases.
- Voluntary National Insurance contributions will increase by 1.7%.
- Furnished Holiday Lets (FHL) are being abolished.
Capital Gains Tax
There was no explicit mention of Capital Gains Tax in Labour’s election manifesto. It has been speculated that there would be an increase on the current favourable rates, doubling down on the increase to the rates made in October 2024. However, no increase in the current rates has been provided for.
MTD (Making-Tax-Digital)
MTD is fast approaching and there seems to be no further back tracking on the mandating. Sole traders and landlords with turnover of £20,000 or more will be mandated to join MTD (Making-Tax-Digital) from April 2028. Joining those with turnover of at least £30,000 who will be on the scheme by this point.
Late payment penalties for VAT and Self-Assessment taxpayers will increase under MTD.
Fraud
HMRC are expanding their counter-fraud capabilities as they are determined to clamp down on those who undermine legitimate trade and small businesses, as well as fraud committed by wealthy individuals and fraud facilitated by larger corporations.
Later this year, HMRC will also be launching their new reward scheme for informants as they target non-compliance amongst large corporate entities, wealthy individuals and offshore schemes. Informants will be rewarded with compensation based on a percentage of any additional tax taken by the Revenue.
Benefits
The health element of Universal Credit applies to those who can’t work because of illness or disability. This is being frozen for existing claimants until 2029-30, currently at £97 per week.
For new claimants, this is being cut to £50 week from 2026/27.
Administration
The Government will be investing in HMRC’s debt management capacity in a drive to make debt collection more automated.
Investment into 500 more HMRC compliance staff is being made in addition to the 5,000 new compliance staff whose recruitment was announced in October. Whether this will decrease the wait time on the phone lines is yet to be seen!
In the summer, HMRC will be publishing a ‘transformation roadmap’ outlining their measures to simplify tax systems to reduce the administrative burdens on businesses and individual taxpayers.
In Summary
For those of us boring enough to be working in tax, this Statement proved to be rather uneventful. Other than the changes already announced in Autumn 2024, there will be no further changes to the amount of tax that an individual is paying.
All eyes turn to the Autumn Budget later in the year which could reveal more changes compared to this Statement.
Rest assured, we’ll keep you updated if any details emerge in the coming weeks that will impact you. We’d be more than happy to have a chat through any of the announcements that are of concern to you. Get in touch today.
