After much speculation, Rachel Reeves delivered her Spring Statement 2025. While the government commitment was to only one fiscal event per year, with no more tax rises, Sir Keir Starmer didn’t rule out a stealth raid on income tax or other tax rises before the statement.
To maintain business confidence, the Spring Statement 2025 was not positioned as a major fiscal event, unlike the Autumn Budget 2024. As promised, the government didn’t announce any further tax rises for UK businesses, business owners, sole traders, individuals, or landlords.
In this blog, we examine the announcements made today in the Spring Statement, but more importantly, provide a reminder of the tax rises and changes introduced in the Autumn Budget 2024, which will take effect from April 2025 and beyond.
The Spring Statement is the Chancellor’s annual speech. It provides MPs with an update on the economy’s overall health, UK growth figures, national statistics and an economic and fiscal forecast from the Office for Budget Responsibility (OBR).
It is one of two major financial statements for the financial year, which runs from 1 April to 31 March. However, unlike the Autumn Budget, the Spring Statement is not a major fiscal event and should not contain further tax rises.
The Office for Budget Responsibility (OBR) monitors the government’s spending plans and performance and publishes its fiscal forecast on the UK economy as part of the Spring Statement. The OBR also reports on how government announcements affect the government’s adherence to its fiscal rules.
A Spending Review is where the government sets departmental budgets for future years. It covers both public services, such as the NHS, schools, and transport, as well as how the government will invest in research, energy security, and infrastructure to drive economic growth across the country.
On 30 October, phase 1 of the Spending Review 2025 took place alongside the most recent Autumn Budget. Through Phase 1, the Government reset public spending for 2024-25 and set departmental budgets for 2025-26.
The Spending Review will set spending plans for at least three years of the five-year forecast period and conclude in June 2025.
The government has to balance the public finances, and today, it announced several strategic and day-to-day spending reductions and efficiency measures to cut spending in the public sector. These include:
Reducing overseas aid spending to 0.3% of gross national income.
Cutting government running costs by 15%, saving £2 billion by the end of the decade.
Cutting Universal Credit health elements for new claimants by around 50%.
An aim to cut total day-to-day spending by £6.1 billion by 2029-30.
Rather than implementing further tax rises, the government has focused on tackling tax evasion to generate an additional £7.5 billion. Today saw announcements to invest in cutting-edge technology and HMRC capacity to crack down on tax avoidance, with plans to increase the number of tax fraudsters charged by 20%.
This could have serious consequences for many people, as they may face increased tax investigations being opened and pursued by HMRC.
Today, did see some good news and a boost for some sectors and the businesses that are in those sectors or support those sectors.
The government is supporting the construction industry through several key initiatives:
Skills Development: Investing £600 million to train 60,000 new construction workers.
Establishing 10 new technical excellence colleges across the country.
Planning reforms to increase house building by 305,000 homes per year.
Increases in capital investment on infrastructure.
Allowing local areas to bid for new development sites.
Passing a Planning and Infrastructure bill to help deliver homes and infrastructure.
The government is supporting technology, AI, and science industries through several strategic initiatives, including:
The government is continuing to modernise the tax system through MTD. From April 2028, sole traders and landlords earning over £20,000 will need to use MTD for income tax.
This follows earlier plans:
Some people won’t need to follow MTD rules, such as non-UK entertainers and sportspeople with no other qualifying UK income. Also, individuals who need to file special information (like being non-resident or using the remittance basis) won’t need to use MTD until April 2027.
The government also plans to update the penalty system, with further details and guidance expected before April 2026.
In the Autumn Budget 2024, Chancellor Rachel Reeves announced significant tax increases and changes to tax thresholds that you should be aware of.
Here is our summary of the Budget announcements and when the changes will take effect.
Significant changes to Capital Gains tax were announced, and some of these changes took effect immediately following the Budget, while others are being phased in gradually.
On 30 October 2024, the lower rate of CGT for basic rate taxpayers rose from 10% to 18%, and the higher rate of CGT for higher rate taxpayers rose from 20% to 24%.
The CGT rate applicable to trustees and personal representatives will rise from 20% to 24%.
The residential property surcharge does not change. This brings tax on assets like shares and managed funds in line with property gains.
Capital Gains annual allowances remain at £3,000 per person and £1,500 for trusts.
Business Asset Disposal Relief (BADR) applies a lower rate of CGT, including on the sale of shares in trading companies when qualifying conditions are met.
To qualify for BADR, individuals selling shares must meet certain conditions.
For qualifying disposals made on or after 6 April 2025, the rate of CGT for Business Asset Disposal Relief and Investors’ Relief will increase to 14%.
For qualifying disposals made on or after April 2026, Business Asset Disposal Relief and Investors’ Relief will increase from 14% to 18%.
For qualifying disposals made on or after 30 October 2024, the lifetime limit for IR was reduced to £1 million.
No changes will be made to residential property gains. These will remain at 18% and 24%.
National Insurance Contributions are paid by workers and the self-employed on earnings and profits, and by employers in addition to the salaries they pay out.
Employers pay National Insurance on workers’ earnings above £175 a week. Rachel Reeves announced higher NICs from April 2025, rising from 13.8 per cent to 15 per cent.
The secondary threshold (the level at which employers start paying NI on an employee’s salary) will be reduced. From April 2025, the new threshold will be £5,000 (down from £9,100).
These changes will significantly increase costs for employers and may well lead to businesses reducing or stopping further recruitment, which may affect business growth.
Employment Allowance enables eligible employers to reduce their annual National Insurance cost.
Currently, a business pays less Class 1 National Insurance at every payroll until it reaches £5,000 or until the end of the tax year (whichever is sooner). From April 2025, the Employment Allowance will increase from £5,000 to £10,500, and the £100,000 threshold will be removed, expanding this to all eligible employers.
The SDLT surcharge for second homes, known as the higher rate for additional dwellings, increased from 31 October 2024 by 2% to 5%.
Further, the SDLT Nil rate threshold will reduce from £250,000 to £125,000 with effect from 1 April 2025.
Note: These changes apply to England and Northern Ireland; Scotland and Wales have separate transaction tax regulations.
Rachel Reeves will fulfil an election promise to remove the "outdated concept" of domicile from the tax system starting in April 2025. A simpler residence-based scheme will be introduced, with considerations for workers coming to the UK on a temporary basis.
Offshore trusts will no longer be able to shelter assets from IHT. Transitional arrangements will be in place for people who have made plans based on current rules.
A 50% reduction for foreign income in the first year of the new regime will be removed.
The temporary repatriation facility will be extended. This will allow non-doms to bring their historic income and gains to the UK at a reduced rate of tax.
Individuals transitioning back to the UK can benefit from the generous four-year foreign income and gains (FIG) regime.
Settlor-interested trusts will lose tax protection on income and gains from April 2025 unless qualifying for the new 4-year FIG regime.
The Chancellor announced changes to Agricultural Property Relief. From April 2026, the first £1m of combined business and agricultural assets will continue to attract no inheritance tax. However, assets over £1 million will get a 50% relief, with an effective rate of IHT at 20%.
The Autumn Budget announcement that surprised everyone was that pensions passed on will be subject to inheritance tax from 2027.
IHT is currently applied at 40% on estates valued above £325,000, and this threshold was frozen until 2028. This freeze will be extended for two more years, until 2030, meaning more people will be subject to IHT as property and estate values rise.
No announcements were made to change pension tax relief or the tax-free lump sum that retirees can withdraw from their pension. There is currently a maximum limit of £268,275 that can be taken as a tax-free lump sum from the age of 55 upwards (set to rise to age 57 in 2028).
We recommend that individuals review their retirement planning. It may be better to access pensions earlier to avoid some IHT.
Business Property Relief on AIM shares will reduce from 100% to 50% in April 2026. This will effectively result in a 20% IHT exposure and reduce their tax planning appeal.
The National Minimum Wage will increase by 6.7% from April 2025.
From April 2025, the National Minimum Wage for individuals aged 21 and above will increase from £11.44 to £12.21 per hour. For workers under 21, the rate will increase from £8.60 to £10.00 per hour. Apprentices’ hourly pay will increase from £6.40 to £7.55 (an 18% increase).
These increases will likely be difficult for many SMEs and businesses to afford, especially in sectors with high staff costs. They could mean businesses employ fewer people, limit future investment, or threaten business viability.
In 2025/26, the retail, hospitality, and leisure industry will receive 40% relief on business rates, up to a cap of £110,000 per business.
Retail properties have qualified for business rates relief since 2020 and benefit from a 75% discount capped at £110,000 per business. This is due to expire in April 2025. The change from a 75% discount to 40% still means that many businesses will see their business rates rise.
We recommend revisiting and revising your tax planning regularly in this ever-evolving tax landscape and uncertain global economy. Our tax experts can help explain upcoming tax rises and minimise your personal and corporate tax bills.
Book a consultation or contact us today at 033 0088 3616, email contact@dnsaccountants.co.uk
Any questions? Schedule a call with one of our experts.
Sumit Agarwal Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.
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