The Labour government has reiterated its commitment to ensuring security, increasing disposable income, and improving living standards for working people. So, what does the Spring Statement mean for you?
You are business owner
It is crucial to note the significant changes that will take effect from 6 April 2025 regarding both the national minimum wage and employers’ national insurance contribution (NIC)
If you are a sole trader, ensure that you are preparing for Making Tax Digital for income tax, which will come into effect on 6 April 2026. See more here
Lastly, if you are considering selling your business, please consult with us. Changes to capital gains and inheritance tax rules could impact your tax liability, and the timing of your transaction can be critical.
You are a landlord
There are no changes to the income tax and corporation tax rates on rental profits. However, it’s essential to prepare for Making Tax Digital for income tax, which takes effect on 6 April 2026. If you are a client of ours, we will contact you to make sure you will be fully prepared by next April.
Additionally, if you’re considering buying or selling property, it’s crucial to stay updated on the evolving stamp duty changes from next week.
The Spring Statement
Please continue reading to see the key headlines from the Spring Statement and our commentary on them. As always, feel free to contact us if you need any further information on aspects of this Statement.
On 26 March 2025, Chancellor Rachel Reeves delivered her Spring Statement to parliament. The statement was set against a backdrop of low economic growth and rising government borrowing costs.
The Chancellor emphasised her commitment to the fiscal rules aimed at promoting stability in the economy and ensuring security for working individuals. With additional borrowing excluded and no tax changes announced, the focus of the Statement was primarily on government spending.
Headlines included:
- An ongoing commitment to generate economic growth, despite short-term forecast growth levels being revised downwards from 2% to 1%.
- Confirmation of increased defence spending in a rapidly changing world.
- Changes to the welfare system, including stricter tests for personal independence payments.
- Streamlining the civil service, with an accelerated new Transformation Fund.
- Increased investment in social and affordable housing.
- Tackling skills shortages, including in the construction sector.
- A crackdown on tax evasion.
As there were no tax changes announced let’s remind of you what next tax year looks like
Your personal tax
Your tax-free personal allowance will stay at £12,570 for 2025/26. The personal allowance is reduced if your income exceeds £100,000 and is completely removed if your income surpasses £125,140. It is therefore important to consider if you can reduce your taxable income if you fall in this category.
For 2025/26, most income tax rates and thresholds remain at their 2024/25 levels.
After your tax-free ‘personal allowance’ has been deducted, your remaining income will be taxed in bands in 2025/26 as follows:
| 2025/26 | ||||
| ‘Other income’ | Savings income | Dividend income | ||
| Basic rate | £1 – £37,700 | 20% | 20% | 8.75% |
| Higher rate | £37,701 – £125,140 | 40% | 40% | 33.75% |
| Additional rate | Over £125,140 | 45% | 45% | 39.35% |
‘Other income’ refers to any income that is not derived from savings or dividends. This includes salaries, bonuses, profits earned by sole traders or business partners, rental income, pension income, and various other sources of income.
You will continue to be taxed at 0% within your personal savings allowance and dividend allowance. The savings allowance continues to be set at £1,000 for a basic rate taxpayer, £500 for a higher rate taxpayer and not offered to additional rate taxpayers. The dividend allowance continues to be set at £500.
Tax relief for pension contributions
Tax breaks for pension contributions are an important part of financial planning, as they help people save for retirement while reducing their taxable income.
Recently, there was some talk about possible changes to these tax breaks before the Spring Statement, but ultimately, no adjustments were made to the amount of tax relief individuals can receive on their qualifying pension contributions.
Taxable income and self-assessment tax returns
If you run a business to make money, like buying items to sell again, you may need to pay taxes on your profits. However, if you earn less than £1,000 a year from trading or renting property, you don’t have to pay taxes on that income. This often includes small activities like dog walking or creating content online.
Once the £1,000 allowance has been exceeded, it is important you report your ‘taxable activity’ to HMRC. We are here to help you get registered and advice you of your tax liability.
Currently, if your trading income exceeds £1,000 you are mandated to submit a self-assessment tax return! The Chancellor has announced plans to develop a new online service so you can report any income between £1,000 and £3,000 via this new system.
You will not need to complete a self-assessment tax return. Additionally, those with no tax liability will not be required to report their trading income.
Modernising HMRC
As part of the government’s ‘Plan for Change,’ steps are being taken to modernize HMRC to improve value for money, enhance efficiency, and support economic growth.
At the heart of this initiative is a focus on greater innovation, particularly in leveraging technological opportunities, which is transforming HMRC into a ‘digital-first’ organization.
A ‘HMRC Transformation Roadmap’ is scheduled to be published this summer.
New PAYE portal
In April 2025, HMRC will launch a new PAYE portal for 34 million employees and pensioners to check their data, report changes, and understand tax code impacts.
This will be exciting enhancement and should hopefully improve the experience a lot of you have when you need to call HMRC in relation to your PAYE taxes.
Penalties
The government is increasing late payment penalties for taxpayers in the MTD regime (VAT), effective from April 2025 or upon joining for Income Tax next year.
The new rates will be
- 3% of outstanding tax after 15 days overdue,
- an additional 3% after 30 days,
- and 10% per annum for 31 days or more.
HMRC is also reviewing the penalty framework for mistakes in tax returns or failure to notify about tax liabilities, aiming to simplify and strengthen the system while distinguishing between genuine mistakes and deliberate tax evasion.
It’s now more important than ever to get your tax affairs in order by working with professionals.
Interest on unpaid tax liabilities
Beginning 6 April 2025, HMRC will increase the late payment interest rate on unpaid tax liabilities by 1.5 percentage points, setting it at the Bank of England base rate plus 4% for most taxes.
This change emphasizes the need to stay on top of your tax affairs and budget for future liabilities. Flexible ‘time to pay’ arrangements may be available, and we can assist you with this.
What’s next
As expected, the Spring Statement did not unfold any tax announcements. A few things are changing from April and most of them were detailed in the last budget.
We are here to help you and be the business partner you didn’t know you could have. If you are concerned about any elements of the Spring Statement or indeed the changes coming in April please let us know.