Spring statement 2025

Chancellor Rachel Reeves delivered her Spring Statement on 26 March 2025. We've pulled together the key announcements that are relevant to business owners, as well as a quick recap of the Autumn Budget. We’ve also included practical tips to help business owners navigate the current financial landscape.​

The Office for Budget Responsibility (OBR) revised the UK's GDP growth forecast for 2025 down to 1%, citing weaker-than-expected growth and global uncertainties. However, growth is projected to improve in subsequent years.​

Inflation is expected to average 3.2% in 2025, with a gradual decline towards the Bank of England's 2% target by 2027.​

Lower than anticipated growth means that demand for goods and services could be weaker, while inflation will still increase costs for raw materials, wages and overheads. Higher prices for everyday goods will likely reduce disposable income, meaning customers will be more cautious with what they spend their money on. ​

No new tax increases were announced in the Spring Statement. However, the government plans to employ advanced technology to enhance HMRC's ability to combat tax avoidance, aiming to raise an additional £1 billion.​

It has been confirmed that Making Tax Digital for ITSA will be proceeding as planned, with a phased rollout based on income levels. From April 2026, self-employed individuals and landlords with a gross income over £50,000 will need to comply, followed by those earning over £30,000 from April 2027. The most recent announcement is that the government plans to bring sole traders and landlords with income over £20,000 into the scheme by 2028. This marks a significant shift in tax reporting, requiring digital record-keeping and quarterly updates to HMRC.​

It has been announced that from April 2025, late payment penalties for VAT and Making Tax Digital for Income Tax Self Assessment will rise from 2% to 3% at 15 and 30 days, and from 4% to 10% from day 31, further encouraging taxpayers to pay on time.​

In the Autumn Budget, it was announced that from April 2025, the rate for employer NICs will increase from 13.8% to 15%, and the threshold at which businesses start paying NICs will be reduced from £9,100 to £5,000 per year. To mitigate this, the Employment Allowance will rise from £5,000 to £10,500, offering relief to eligible businesses. ​​

With HMRC using more advanced technology to combat tax avoidance, and with heftier penalties for late payments, businesses should ensure their tax affairs are in good order to avoid being caught out or suffering high interest rates on late payments.​

While the increased Employment Allowance will provide some relief, many businesses will still face higher NIC costs due to the rising rate and lower threshold. In general, businesses with six or more employees earning an average salary of £39,000 will be worse off, while those with five or fewer employees are likely to see little change or benefit from the allowance increase.​

The Employment Rights Bill is expected to receive Royal Assent on 6 April, meaning Statutory Sick Pay (SSP) SSP will be payable from the first day of sickness, removing the previous waiting period. Additionally, the qualifying earnings threshold will be abolished, making more workers eligible.​

There is also an introduction of Statutory Neonatal Care Leave, whereby parents of newborns requiring neonatal care will be entitled to 12 weeks of additional leave and pay, which will be provided in addition to other existing parental leave entitlements.​

There will be a slight increase in taxable benefits for company-provided cars, vans, and fuel. From 6 April 2025, double-cab pickups will be classified as cars rather than vans for tax purposes if purchased or leased after this date, making them subject to less favourable tax treatment.​

The National Minimum Wage (NMW) is increasing across all age groups, with the largest year-on-year rise for the 18-20 bracket. This is the first step towards expanding the National Living Wage (currently for 21+) to include everyone aged 18 and over in the future.​

The changes to SSP mean businesses will need to be prepared for increased costs, as sick pay will be due from day one. Additionally, with the qualifying earnings threshold removed, more employees will become eligible.​

Employers should review their parental leave policies and staff handbooks to accommodate the new Statutory Neonatal Care Leave entitlement.​

Businesses using double-cab pickups should consider the tax implications of the reclassification from vans to cars, as this could increase costs for vans purchased or leased on or after 6 April 2025. ​

The NMW increase will particularly impact businesses employing younger workers, requiring wage adjustments and potential budget planning.​

Defence spending will rise to 2.5% of GDP, with a focus on emerging technologies such as drones and artificial intelligence. This initiative aims to bolster the UK's defence industry. A £3.25 billion "transformation fund" has also been established to modernise public services through technological advancements, including AI tools. ​

For businesses in the manufacturing, AI and technology sectors there are possible opportunities for government contracts or government grants.​

Take a read of our blog post on the Autumn Budget here.​

Capital Gains Tax (CGT): The basic CGT rate will increase from 10% to 18%, and the higher rate from 20% to 24%. Business Asset Disposal Relief will remain but at a higher rate, increasing to 14% in April 2025 and 18% by 2026.​

Business Rates Relief: A permanent 40% discount on business rates for retail, hospitality, and leisure sectors will be introduced from April 2025, replacing the temporary 75% relief. This relief is capped at £110,000 per business.​

Corporation Tax Cap: Corporation tax will be capped at 25% for the duration of the current parliament, providing businesses with certainty for tax planning.​

National Living Wage: From April 2025, the National Living Wage for individuals over 21 will increase to £12.21 per hour, impacting payroll expenses for small businesses.​