The Chancellor’s Spring Statement 2025 included a series of important updates aimed at tightening tax compliance, investing in enforcement, and gradually modernising the UK tax system. We’ve broken down the most relevant points for small businesses and individuals, so you can stay informed and prepare for what’s ahead.

1. HMRC Powers and Debt Recovery to Increase

The government is stepping up its efforts to recover overdue tax:

• “Direct recovery” of tax debts will restart, targeting individuals and companies who can pay but choose not to.
• Automation is being explored for low-value tax debt collection.
• Businesses with outstanding tax liabilities over 12 months should expect increased enforcement activity.

This change is likely to increase pressure on businesses to stay on top of their tax obligations. Proactive management of any liabilities is now more crucial than ever.

2. Significant Investment in HMRC Resources

To support tougher compliance activity, the government is expanding HMRC’s workforce:

• 500 additional compliance officers (on top of 5,000 already announced last October).
• 600 new debt management staff to chase overdue payments.

Expect to see faster and more rigorous action on outstanding debts and suspected non-compliance.

3. MTD Expansion for Sole Traders and Landlords

The government has extended Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) to sole traders and landlords with turnover exceeding £20,000 from 5 April 2028. This is on top of the previously announce rollout below:

• From April 2026: MTD will apply to those with qualifying income over £50,000.
• From April 2027: It will apply to those with qualifying income over £30,000.

This phased approach gives affected taxpayers some breathing space, but it also signals the end of traditional self-assessment for many. If you’re in any of these brackets, it’s wise to begin reviewing your record-keeping and accounting software now to ensure it’s MTD-ready before the deadlines hit.

4. Harsher Penalties for Late VAT and Tax Payments

Late payment penalties are going up — for those under the MTD system for VAT and ITSA (when applicable):

• 15 days overdue: 3% of the tax owed.
• 30 days overdue: another 3%.
• 31+ days overdue: 10% per annum on top of the previous charges.

Businesses and individuals must improve their tax payment discipline or face significantly higher costs.

5. New Consultations on Tackling Tax Evasion and Avoidance

The government launched four consultations focusing on:

• Using third-party data to improve tax automation and reduce the tax gap.
• Strengthening action against tax advisers who enable non-compliance.
• Clamping down on promoters of marketed tax avoidance schemes.
• Reforming penalties for inaccuracies and failure to notify HMRC.

These proposals highlight a clear message: those facilitating or engaging in avoidance will be under increasing scrutiny.

6. Additional Compliance Measures

Further initiatives aimed at tightening compliance include:

• A new reward scheme for informants reporting serious tax non-compliance.
• Measures to combat phoenixism, where individuals use insolvency to avoid tax and restart under a new entity.

7. Certainty for Complex Tax Matters

From now on, businesses can apply for advance pricing agreements on Cost Contribution Arrangements (CCAs) via HMRC’s Advanced Pricing Agreement programme — offering greater certainty in international tax treatment.

8. Business Rates and ISA Reforms on the Horizon

The government has:

• Reconfirmed business rates reform is on the agenda — although no detailed proposals yet.
• Indicated that ISA reforms are being reviewed, with likely updates expected in the October 2025 Budget.

9. Domicile Rules Abolished

From 6 April 2025, the concept of domicile for UK tax purposes will be abolished. While further detail is expected, this marks a significant shift in how UK tax residency and overseas income will be treated.

10. Changes to EMI, EIS and VCT on the Table

The government is reviewing the Enterprise Management Incentive (EMI) scheme, Enterprise Investment Scheme (EIS), and Venture Capital Trusts (VCT). Discussions begin this April, so expect potential reforms aimed at boosting investment but possibly tightening eligibility.

11. New Process for High Income Child Benefit Charge (HICBC)

From summer 2025, employed individuals liable for HICBC will:

• Be able to manage this directly via PAYE, using a new digital service, avoiding the need for Self-Assessment.

This change should ease administrative burdens for higher earners who claim Child Benefit.

12. R&D Tax Credit Consultation Launched

A consultation is now open to:

• Explore advance clearances for R&D tax claims.
• Reduce error and fraud.
• Offer more certainty and improve the experience for businesses.

This move aims to make the R&D process more transparent and efficient.

Final Thoughts

The Spring Statement 2025 reflects a strong government focus on compliance, automation, and tightening the tax system. While some changes are years away, others — particularly those affecting HMRC powers, late payments, and MTD — are pressing.

If you’re a small business owner or individual unsure how these updates affect you, now’s the time to speak with your accountant or tax adviser. Proactive planning will help you stay compliant — and avoid unnecessary penalties.

Get in touch today to speak to the team and turn your year-end into a strategic advantage.

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