The 2025 Spring Statement: What Accountants Need to Know

The Chancellor of the Exchequer, Rachel Reeves, delivered her Spring Statement last week in which she outlined the government’s economic plans, including spending decisions, tax policies and efforts to boost growth while managing public finances.

What the Spring Statement told us about the economy

The 2025 Spring Statement came on the back of the latest forecasts prepared by the Office for Budget Responsibility (OBR). The forecasts showed a more challenging economic outlook than was the case last autumn. The OBR cited falls in business and consumer confidence, rising European energy costs, increased government borrowing costs and global uncertainties from issues such as the war in Ukraine and trade tariffs.

As a result, the OBR have downgraded their forecast of GDP growth to 1% for this year. Last autumn they predicted growth of 2%, so this is a significant adjustment in their expectations. However, their projections of growth in the next four years have been upgraded, suggesting that they see the long-term more positively.

The OBR have forecast inflation to average 3.2% this year, up from 2.6% in their previous estimate. They predict that inflation will fall to 2.1% in 2026 and 2% in 2027.

The OBR figures will only have confirmed what most have already been experiencing. Your business clients are likely to be facing rising costs and challenges getting sales across the line.

Having clear and up-to-date financial information is a key strategy to managing these difficulties, so clients may appreciate you offering assistance in this area. Helping with projections or training clients to do simple cashflow forecasts could be welcomed. Lending an empathetic ear will also help to build trust and loyalty.

There were no direct tax increases

The OBR's forecasts show that public finances will not meet the targets set at the 2024 Autumn Budget. These targets were based on the Chancellor's self-imposed stability and investment rules. Governments often use these fiscal rules to provide credibility to financial markets, and the Chancellor was clear in her continued commitment to her rules. However, this meant there was pressure on the Chancellor to either raise taxes or reduce spending to cover the forecast shortfall.

In good news for businesses, the Chancellor made no direct increases to taxes. She confirmed her intention to have only one major fiscal event a year and so we can rest easy knowing that any further tax changes will wait until the 2025 Autumn Budget.

Instead, the Spring Statement outlines a number of plans to reduce public spending, including welfare reforms, and reduced day-to-day spending in government departments. In addition, it is clear the Chancellor has adopted a policy of growing the economy and is looking at ways to promote that, including by supporting increased homebuilding activity. Economic growth is aimed at ‘putting more money in people’s pockets’, but it also indirectly boosts the revenues the government receives.

How can you use this to help your clients?

Financial controls can help businesses and individuals manage their finances effectively. So, it may help your clients to know which financial controls are likely to be most effective for them.

You could also help your clients gauge whether there are opportunities available to them to increase their income, or alternatively, whether there are areas where costs could be reduced without harming cash inflows.

While there were no tax increases discussed in the Spring Statement, there were some announcements affecting tax policy. Here’s a look at some of the measures that will affect our work in the coming months and years.

Making Tax Digital will affect more sole traders and property landlords

The Spring Statement confirmed that Making Tax Digital for Income Tax (MTD for IT) will be further extended to bring in sole traders and property landlords with income of £20,000 or more.

This means that the timeline for clients onboarding into the MTD for IT regime is now as follows:

• 6 April 2026: MTD for IT becomes mandatory for sole traders and property landlords who generated trade and rental income of more than £50,000 in the 2024/25 tax year.
• 6 April 2027: MTD for IT becomes mandatory for sole traders and property landlords with trade and rental income of more than £30,000 in the 2025/26 tax year.
• 6 April 2028: MTD for IT becomes mandatory for sole traders and property landlords with trade and rental income of more than £20,000 in the 2025/26 tax year.

Your sole trader and property landlord clients will need plenty of advance warning of these changes, so early communication with them is key. Clients may need help selecting and learning how to use MTD-compatible software. 

Hint: 20:20 Innovation members should make use of the resources and template communication documents provided as part of the membership. Also remember to book onto your member webinar.

It was also confirmed that, for those mandated into MTD for IT, their end-of-year tax return must also be submitted using MTD-compatible software. It will not be possible to use a free HMRC online service. This could give you an opportunity to grow your client base with those who currently prepare and submit their own tax return.

Increase in late payment penalties and interest

The government will be increasing the late payment penalties for taxpayers with the MTD regime, whether for VAT or income tax. The increased rates will come into effect from April 2025, or whenever the individual or business joins the MTD regime in question.

The new rates will be as follows:

• 3% of the tax outstanding where tax is overdue by 15 days.
• An additional 3% where tax is overdue by 30 days.
• Plus 10% per annum where tax is overdue by more than 30 days.

HMRC is also looking at the penalty framework that applies when a taxpayer makes a mistake in their tax return or other tax document, or omits to tell HMRC about a circumstance that affects their tax liability.

In addition, from 6 April 2025, the late payment interest rate charged by HMRC will increase by 1.5 percentage points. In other words, most will pay at a rate of the Bank of England plus 4%.

These changes will make it ever more important for your clients to pay their tax on time. Paying tax is your client’s responsibility, however where they rely on you to advise them, you can minimise potential problems by communicating the tax amounts they are due to pay clearly and with as much advance notice as possible.

Business rates reform

The government has been consulting on longer-term measures to support high street businesses. The Spring Statement confirmed that an interim report on the future of the business rates system will be published in the summer. Further policy detail will follow in the autumn.

For the time being, RHL businesses will be given a 40% relief on their business rates in 2025/26. The small business tax multiplier for properties with a rateable value below £51,000 will also be frozen for 2025/26.

When preparing accounts for your RHL clients, check that they are paying the reduced rates. Council do not always get this right!

Additional clarity on R&D reliefs

Due to the complexity of the rules around R&D reliefs, many companies do not know at the point of making an R&D investment whether the costs will qualify for R&D relief. This can lead to no claim being made, or a claim being made that doesn’t qualify.

HMRC already offer voluntary advance assurances to businesses to help them have more certainty about their claim. However, this service is not commonly used.

The government is consulting on widening the use of ‘advance clearances’ to try and make them more useful and reduce errors and fraud. One aspect being considered is whether to make assurances mandatory in certain areas – particularly those where HMRC feels the risk of an incorrect claim is high.

The consultation also considers whether there should be a minimum expenditure threshold before R&D relief can be claimed. In the past, a £25,000 threshold has been used.

Because of how complicated R&D can be, businesses often need the help of a professional adviser to claim what they are owed. Are you maximising the R&D work that may exist in your client base?

‘Phoenixism’ is where company directors go insolvent to evade tax and write off debts owed to others, and then start a new business.

HMRC, Companies House and the Insolvency Service will be delivering a joint plan to better tackle those abusing the insolvency regime. This will include making more directors personally liable for the taxes of their company and increasing the number of enforcement sanctions.

One aspect that could affect newly formed companies is that HMRC may ask for an upfront payment of tax as security.

Changes potentially coming to Individual Savings Accounts (ISAs)

There is no change to the £20,000 limit that a taxpayer can save into ISAs in 2025/26. However, the Spring Statement confirmed that the government is reviewing how ISAs are balanced between cash and equities. The limit that applies to cash ISA investments may be reduced.

It is unlikely that any change will take effect before the 2026/27 tax year, but it might be worth making sure that relevant clients continue to maximise tax savings in this area.

New digital service for High Income Child Benefit Charge (HICBC)

A new digital service is going to be introduced that will allow employees who are liable to pay the HICBC to declare the charge and opt to pay it directly through PAYE. This will mean not having to register for self assessment if there is no other need to. The service should be available from summer 2025.

It would be worth keeping an eye out for this service and alerting any of your clients that it may apply to. While most clients are still likely to need to complete a self assessment return, some clients may prefer to pay the charge via payroll.

Private company share transactions

The government has been developing the Private Intermittent Securities and Capital Exchange System (PISCES) over the last year. This is a new type of stock exchange that will allow private companies to trade their existing shares on an intermittent basis.

PISCES could be particularly useful for employee or early investor shareholders who want (or need) to realise a gain on their investment, without the company having to go public. Only certain types of investors can buy shares on a PISCES, they will not be open to the general public.

Legislation is expected in May 2025 and the government is consulting on a Stamp Duty and Stamp Duty Reserve Tax exemption for PISCES share transactions.

The government has also published information on how employee-owned shares under PISCES can interact with Enterprise Management Incentives and Company Share Option Plans.

The number of clients that will use PISCES are likely to be limited. However, it is worth being aware of its existence when you are discussing plans to buy or sell private company shares or offer employee ownership with clients.

Many were hoping the Spring Statement would bring some relief from the Employers NI changes due to go into effect in April or to backtrack on the proposed changes to IHT reliefs for business and agricultural assets. However, the Spring Statement mainly focused on government policies related to public, welfare and defence spending. Announcement of any further tax changes will now wait until the 2025 Autumn Budget.

In the meantime, clients will need your expertise to help them navigate the government’s new policy measures and to stay on a financially sound footing in today’s uncertain economy.