Spring Statement 2025
The Chancellor of the Exchequer, Rachel Reeves, has delivered her Spring Statement to the House of Commons. The government continues to be faced with challenging economic conditions as the global economy appears to be faltering.
The Chancellor had very little good news to deliver with the Office for Budget Responsibility forecasting economic growth at 1% for 2025 a fall from 2% last autumn. The OBR has then predicted GDP growth of 1.9% in 2026, 1.8% in 2027, 1.7% in 2028, and 1.8% in 2029. The OBR also forecast CPI inflation is expected to average 3.2% this year, falling to 2.1% next year and meeting the OBR’s 2% target from 2027 onwards.
Whilst no major tax changes were announced we have covered the main announcements below. It will be a long number of months until the Autumn Budget and many changes can be expected.
Taxation
Making Tax Digital
A technical note outlining further measures relating to Making Tax Digital (MTD) for Income Tax, announced in the Spring Statement 2025 was published. Key plans include:
Expanding MTD: MTD for Income Tax will be extended to sole traders and landlords with income over £20,000 starting April 2028.
Exemptions and Deferrals: Certain taxpayer groups will be exempted or have their MTD obligations deferred.
Improving End-of-Year Processes: MTD-compatible software will become the default for submitting end-of-year information and the Final Declaration (Tax Return).
Finalising Policy Framework: The policy framework for MTD and penalty reform will be completed.
HMRC will engage further with stakeholders before introducing legislation and mandating changes in April 2026.
Closing in on promoters of tax avoidance
The government is consulting on new measures to target promoters of tax avoidance, with a focus on closing the remaining tax gap from marketed avoidance schemes.
The consultation, open until 18 June 2025 seeks feedback on four key proposals:
Expanding the Disclosure of Tax Avoidance Schemes (DOTAS) regime.
Introducing a Universal Stop Notice and Promoter Action Notice.
Creating stronger obligations and information powers for tackling those behind avoidance schemes.
Addressing the role of legal professionals in promoting such schemes.
The aim is to give HMRC additional powers and sanctions to disrupt the business models of tax avoidance promoters, ultimately improving the effectiveness of efforts to combat avoidance. The government is also exploring further options to address this issue in the future.
Tackle tax advisers facilitating non-compliance
A new consultation has been announced on strengthening HMRC’s ability to take action against tax advisers facilitating non-compliance in their client’s tax affairs. The consultation which runs until 7 May 2025, focuses on:
Expanding HMRC's information powers against tax advisers.
Introducing stronger penalties for tax advisers who contribute to the tax gap.
Publishing details of tax advisers subject to HMRC sanctions.
Sharing more information about tax advisers with their professional bodies.
The consultation seeks views on whether current powers are effective and invites feedback from tax advisers, clients, and professional bodies to help shape future policy and enhance enforcement measures.
Behavioural penalties reform
HRMC will also look at simplifying and strengthening behavioural penalties for inaccuracies and failures to notify. The consultation, open until 18 June 2025, explores two potential approaches:
Reforming the existing framework: This approach would simplify penalty calculations, reduce penalty categories, standardise behaviour assessments, and make rules clearer.
Exploring an alternative model: This approach would involve a more fundamental redesign to improve clarity, consistency, and fairness, while reducing complexity for taxpayers, agents, and HMRC.
The consultation seeks views on which approach would best achieve fairness, compliance, and deterrence while simplifying the penalty system.
R&D tax relief advance clearances
A new consultation seeks views on improving the clearance process for Research and Development (R&D) tax reliefs with the aim of reducing error and fraud, providing businesses with greater certainty, and enhancing the overall customer experience. The government is considering widening the use of advance clearances for R&D tax reliefs to achieve these goals, ensuring businesses have clearer guidance on tax obligations and minimising potential mistakes.
Additionally, the government is consulting on a new process that would offer major projects increased certainty in advance regarding the tax treatment that applies to them. This is intended to support businesses in making better investment decisions. The consultation will close on 26 May 2025.
Better use of new and improved third party data
A new consultation seeks views on improving the quality of data collected under HMRC's bulk data-gathering powers for tax administration. The consultation, open until 21 May 2025, seeks views on plans to enhance customer service, close the tax gap, and modernise the tax system.
Key benefits of better third-party data include reducing administrative burdens by accurately pre-populating income on tax returns and improving tax compliance by identifying misreporting or hidden assets. The government aims to modernise data acquisition processes and improve IT systems to ensure HMRC receives timely, accurate data to serve taxpayers effectively and raise revenue for public services.
Other announcements
Welfare Spending Cuts
The government plans to reduce welfare expenditures by £3.4 billion, affecting benefits for the ill and disabled.
The government is introducing stricter eligibility criteria for those claiming Personal Independence Payment (PIP). According to the OBR around 800,000 people are expected to lose eligibility for the daily living component of PIP due to the new threshold that requires scoring at least 4 points in a single daily living activity.
The Universal Credit Standard Allowance will increase from £92 per week in 2025-26 to £106 per week by 2029-30 and the Universal Credit Health element will be cut for new claimants by 50% and then frozen.
Civil Service Reductions
Plans to reduce Whitehall's administrative expenses by 15% by the end of the decade are being led by the Chancellor of the Duchy of Lancaster. This initiative includes reducing staff across various government departments and agencies and saving £2 billion by the end of the decade.
Defence Funding
An increase of £2.2 billion for the Ministry of Defence in the next financial year. The Chancellor said that the government will spend a minimum of 10% of the Ministry of Defence’s equipment budget on technologies including drones and AI enabled technology and work to create thousands of jobs in the industry.
Housing and Planning
Reforms to planning regulations aim to facilitate the construction of over 1.3 million new homes over the next five years, contributing an estimated £6.8 billion to the economy.
