Spring Statement 2025 roundup

Rachel Reeves has delivered the UK government’s Spring Statement to Parliament. Despite it not being a fiscal event with changes to tax rates, there were still several measures announced of interest to accountants and tax advisers.

Making Tax Digital

Making Tax Digital for Income Tax (MTD ITSA) will be extended for sole traders and landlords from April 2028. Currently the requirements for sole traders and landlords to maintain digital records and submit quarterly updates to HMRC apply to sole traders and landlords with a gross income above £50,000 from April 2026 and from April 2027 for those with a gross income above £30,000. From April 2028, MTD ITSA will be extended to sole traders and landlords with gross income over £20,000.
 
Multiple practical changes to the design of MTD ITSA have also been announced.

Several exemptions will now apply to MTD ITSA meaning those in these groups won’t be required to use MTD ITSA, subject to notifying and satisfying HMRC that they are exempt:

•    Taxpayers who have a Power of Attorney.
•    Non-UK resident foreign entertainers and sportspeople who have no other income sources that count as qualifying income for MTD.
•    Taxpayers for whom HMRC cannot provide a digital service.

In addition, the following groups won’t be required to join MTD ITSA over the course of this Parliament:

•    Ministers of religion 
•    Lloyd’s Underwriters
•    Recipients of the Married Couples’ Allowance or the Blind Persons’ Allowance

Additionally, individuals won’t be required to use MTD ITSA until April 2027 if they have information that they would need to submit using the SA109 schedule (Residence, remittance basis etc). 

Some individuals within the scope of MTD ITSA will also have other sources of income that need to be reported in self-assessment. These additional income sources would have to be reported at the end of the tax year, alongside any necessary adjustments to their business income and expenses. Individuals could use software to submit quarterly updates of their MTD mandated income sources, but they could choose to use HMRC’s online filing service to submit their tax return. MTD ITSA taxpayers will now be required to file their tax return through their MTD software.

Further changes to the design of MTD and penalty reform were also announced. These include:

•    Changes to enable taxpayers with an accounting date of 31 March to start their MTD obligations on 1 April in the first year of operating MTD, avoiding the need for burdensome manual adjustments at the end of the tax year. 
•    A power for HMRC to cancel or reset late submission penalty points and to cancel associated financial penalties. This enables HMRC to cancel penalty points, for instance, in periods prior to insolvency, so that penalty reform reflects HMRC’s general approach to insolvent taxpayers.

Late penalty changes

Late payment penalties for VAT and income tax self-assessment taxpayers as they join Making Tax Digital from April 2025 onwards will increase. The new rates will be:

•    3% of the tax outstanding where tax is overdue by 15 days; plus
•    3% where tax is overdue by 30 days; plus
•    10% per annum where tax is overdue by 31 days or more.

This measure will be effective from 6 April 2025.

High Income Child Benefit Charge (HICBC) 

From Summer 2025, taxpayers in a household claiming Child Benefit who have an adjusted net income above £60,000 will be able to report their family’s Child Benefit payments through a new digital service. This will give the option for them to pay HICBC directly through PAYE, without the need to register for self-assessment.

National insurance: Small employer compensation rate

An increase in the Small Employer Compensation rate, which compensates small employers for the additional costs of paying National Insurance for employees taking statutory parental leave has been announced. Due to an increase in employer National Insurance contributions at Autumn Budget 2024 this rate will increase from 3% to 8.5%. This measure will be effective from 6 April 2025.

Building Safety Levy (England only)

The new levy on new residential development in England (with certain exemptions) will come into operation on 1 October 2026 with revenue to be spent on building safety from 1 October 2026.

Tax Collection

HMRC’s debt management capacity is to be expanded using third-party debt collection agencies (DCAs) to increase the collection of overdue tax debt. An additional £9m funding a year between 2025/26 to 2028/29 to the previously announced funding of £35m each year. The revised annual funding is also extended by a further year through to 2029/30. HMRC will also invest a further £4m to place a small proportion of lower value tax debt over 12 months old in 2025/26.

Funding has been provided for an additional 500 HMRC compliance staff. Recruitment is to begin in April 2025.

In addition, funding for a further 600 HMRC debt management staff has been allocated to expand HMRC’s capacity to collect tax debts at a later stage of the debt management process. 200 staff will be recruited from April 2026 and will be replicated in the two subsequent tax years.

Consultation: Research and development (R&D) tax relief advance clearances

A consultation has been launched with the objective of exploring options to reduce error and fraud, provide certainty to businesses and improve the customer experience in relation to R&D tax reliefs. The government is seeking views on whether a system of advanced clearances would deliver these aims and the best way to design and operate such a system.

This consultation closes at on 26 May 2025.

Consultation: Advance tax certainty for major projects consultation

In the Autumn Budget 2024, the government announced in its Corporate Tax Roadmap that it would be consulting on a new process to provide increased tax certainty in advance for major projects.

This consultation seeks views on how a new process could work to support investment decisions.

The consultation also separately announces the outcome of the review of the transfer pricing treatment of Cost Contribution Arrangements (CCAs). Businesses will be able to obtain certainty on the transfer pricing treatment of such arrangements through the UK’s existing Advance Pricing Agreement programme.

This consultation closes at on 17 June 2025

Consultation: Behavioural penalties 

The consultation explores options to simplify the ways in which penalties are calculated and applied and provide a stronger deterrent for those who deliberately avoid paying what they owe.

Consideration is given to two options – changes to the current penalty regime and a new alternative approach.

This consultation closes on 18 June 2025.

Consultation: Enhancing HMRC's ability to tackle tax advisers facilitating non-compliance

This consultation seeks views on whether HMRC’s current powers are effective in dealing with non-compliance facilitated by tax advisers. It’ll be of particular interest to tax advisers, their clients or potential clients and tax and accountancy professional and regulatory bodies.

The consultation asks for views on a complementary suite of potential measures:

•    Expanding information powers against tax advisers
•    Introducing stronger penalties against tax advisers who contribute to the tax gap
•    Publishing details of tax advisers subject to HMRC sanctions
•    Sharing a greater range of information about tax advisers with their professional bodies

This consultation closes on 7 May 2025.

Consultation: Closing in on promoters of tax avoidance

Views are being asked for on a range of new measures to close in on promoters of tax avoidance. These include proposals that would give HMRC additional powers and stronger sanctions, allowing HMRC to more efficiently and effectively disrupt the business model promoters rely on. The government’s intent is to make a step change in efforts to close in on the small number of remaining promoters of tax avoidance. This would contribute to closing the tax gap attributable to marketed tax avoidance.

The proposals cover four areas:

•    Expanding the scope of the Disclosure of Tax Avoidance Schemes (DOTAS) regime.
•    Introducing a Universal Stop Notice and Promoter Action Notice.
•    Tackling controlling minds and those behind the promotion of avoidance schemes through new highly targeted obligations and stronger information powers.
•    Exploring options to tackle legal professionals designing or contributing to the promotion of avoidance schemes.

This consultation closes on 18 June 2025.

Consultation: Better use of new and improved third-party data to make it easier to pay tax right first time 

This consultation looks at how the quality of specific data that HMRC already collects using its ‘bulk data gathering powers’ can be improved. This includes data collected in relation to:
 
•    Financial account information – including bank and building society interest (BBSI) and other interest.
•    Card sales – data shared by providers of card acquiring services, such as merchant acquirers.
 
It also sets out some early ideas on collecting new data from financial institutions on dividend income and other income from investments.
 
The consultation closes on 21 May.