The Chancellor, Rachel Reeves, delivered the Spring Statement 2025, providing an update on the UK’s public finances and economy. While not a full Budget (which is scheduled for the Autumn), the statement and accompanying documents contained several important points relevant to individual taxpayers, businesses, and the self-employed. Here’s a breakdown based on the official announcements:

The Economy

Income Stability Focus

• The government emphasized its commitment to fiscal rules aimed at ensuring day-to-day spending is met by tax receipts by 2029/30 and that national debt falls as a percentage of GDP by the end of the forecast period.

Inflation

• The Office for Budget Responsibility (OBR) forecasts CPI inflation to average 3.2% this year, falling to 2.1% in 2026 and meeting the 2% target from 2027.

Economic Growth

• The OBR has revised the UK growth forecast for 2025 down from 2% to 1%. However, forecasts for subsequent years have been upgraded, with GDP growth projected at 1.9% (2026), 1.8% (2027), 1.7% (2028), and 1.8% (2029). The government attributes part of this future growth to its planning reforms

Household Income

• The OBR forecasts that real household disposable income will grow this year at nearly double the rate expected previously. They estimate people will be, on average, over £500 a year better off compared to forecasts under the previous government, after accounting for inflation.
  

The Key Tax & Financial measures

No Major Tax Rate Rises

• As promised previously, the statement confirmed no increases to the headline rates of Income Tax, National Insurance (NI), or VAT. The NI Lower Earnings Limit and Small Profits Threshold are also maintained at 2024-25 levels for 2025-26.

High Income Child Benefit Charge (HICBC) Reform

• From April 2025: The individual income threshold at which HICBC starts will increase from £50,000 to £60,000. The taper range will also extend, with the benefit fully withdrawn when individual income reaches £80,000 (up from £60,000).
• From April 2027: A fundamental reform is planned, moving to a system based on household income rather than individual income. The planned threshold for the household-based charge is £120,000, with a taper up to £160,000.

Making Tax Digital for Income Tax Self Assessment (MTD ITSA)

• The implementation dates have been confirmed:
• April 2028: MTD ITSA will commence for businesses, self-employed individuals, and landlords with qualifying income over £50,000.
• April 2029: MTD ITSA will commence for those with qualifying income over £30,000.

Late Payment Penalties (ITSA)

A new points-based penalty regime for the late payment of Income Tax Self-Assessment liabilities will be implemented from April 2028, aligning with the MTD ITSA rollout. This replaces the current penalty system.

Tackling Tax Evasion & Avoidance

The government is investing further in HMRC’s capacity and technology to crack down on tax evasion and avoidance, aiming to raise an additional £1 billion annually (total £7.5 billion). This includes plans to increase the number of tax fraudsters charged by 20%. Ensure your tax affairs are compliant.

Fuel Duty

• The temporary 5p cut in fuel duty rates will be extended for another 12 months, ending on 22 March 2026. The planned inflation-linked increase for 2025-26 is also cancelled.

Vehicle Excise Duty (VED)

VED bands for cars, vans, and motorcycles will be frozen for 2025-26.

Business Rates

The Small Business Multiplier remains frozen at 49.9p for 2025-26. The Standard Multiplier will increase with inflation (CPI) to 55.5p.

Soft Drinks Industry Levy (SDIL)

Rates will continue to be uprated annually in line with CPI inflation.

Other Relevant Measures

Parental Leave Pay

Statutory pay rates (Maternity, Paternity, Adoption, Shared Parental, Parental Bereavement) will be maintained at their 2025-26 levels up to 2029-30. This means the cash value will not rise with inflation during this period.

Home Office Fees

Fees for various immigration and nationality routes (including work and study visas, settlement, citizenship, passport applications, and priority services) are set to increase by an average of 15% from April 2026. Businesses relying on overseas recruitment should factor this into planning.

Defence Industry Investment

Significant investment continues, including procurement reform for SMEs, funding for innovation (AI, drones), and increased export finance support.

Capital Spending & Planning

Government capital spending increases by an average of £2bn per year. Planning reforms are expected by the OBR to boost housebuilding and GDP significantly.

Summary

This Spring Statement confirmed stability in major tax rates but introduced significant changes affecting specific areas like the High Income Child Benefit Charge, the timeline for MTD ITSA, and associated penalty regimes. Businesses should note the business rates changes, upcoming Home Office fee increases, and the renewed focus on tax compliance. Individuals will see changes to HICBC thresholds and the extension of the fuel duty cut. The freezing of parental pay rates marks a real-terms decrease over time. Planning for MTD ITSA from 2028/29 is now critical for affected businesses and landlords.

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