Taxes at the Spring Statement and beyond

The Spring Statement, though relatively light on tax, was an important milestone for the Labour Government. This is the second biannual set piece for the Chancellor of the Exchequer, which kept in line with her manifesto pledge to have only one major fiscal event a year for tax. This pledge was reconfirmed during the speech, which leaves greater scope for more significant tax changes at the Autumn Budget given the current UK and global economic climate.

The Chancellor did however announce additional measures to combat tax avoidance, and further measures were included in the Spring Statement document. A number of new consultations were published alongside this.

• The Government has stated it will continue to work with stakeholders to ensure the new residence-based regime, which replaces the domicile regime, is internationally competitive and continues to focus on attracting the best talent and investment to the UK
• It is also looking at options for reforms to Individual Savings Accounts (ISAs) that get the balance right between cash and equities. In the run up to the Spring Statement, it was reported that Rachel Reeves was considering limiting the annual cash ISA allowance to £4,000, to encourage savers to invest. This would result in reduced tax efficiencies for those who prefer cash savings
• The Government will continue to work with leading entrepreneurs and venture capital firms on how policy supports its growth aims, including the role of tax reliefs such as the enterprise management incentives scheme, the enterprise investment scheme and the venture capital trust scheme
• A technical note has been published on making tax digital for self-assessment, confirming that from April 2028 sole traders and landlords with income over £20,000 will be within scope. This can be seen as a continuation to previous announcements that those with income over £50,000 would be required to submit quarterly returns from April 2026, and over £30,000 from April 2027

• The corporate tax roadmap published alongside the Autumn Budget set out the Government’s intentions for key areas of the corporation tax regime for the duration of this Parliament and included a commitment to explore the options available to increase certainty for businesses. In line with that commitment, two new consultations have been launched focussing on a revised system of advance clearances for research and development tax relief, and a new process for giving major projects greater advance tax certainty
• Advance assurance for R&D allows companies to seek assurance that their first three R&D claims will be accepted without further enquiry. Uptake of the process has been very low since its introduction, in part due to lack of awareness, and potentially also influenced by the previously very low levels of HMRC scrutiny on R&D claims
• This consultation asks for views on how a reformed system could be structured. Questions also suggest HMRC is considering re-introducing a minimum spend threshold for R&D relief (abolished in 2012), likely because in recent years, concerns regarding error and fraud in R&D have primarily been focused on high volumes of very small R&D claims
• It has also been confirmed that businesses will be able to use the existing Advance Pricing Agreement programme to obtain certainty on the transfer pricing treatment of cost contribution arrangements

• A consultation has been published on the options available to remove Climate Change Levy (CCL) costs from electricity used in electrolysis to produce hydrogen. There is no current exemption or relief. There is also a commitment to a wider review of CCL, which is long overdue as the tax regime dates from 2000 when the energy market and infrastructure were very different. The Government is asking for early identification of areas that need to be considered
• The producers of electrolytic hydrogen, other hydrogen producers, and those in the energy sector will be interested in the outcome of the consultation and should consider making representations to ensure that any changes are fair and operable, and that other new scenarios and business models that need attention, such as alternative fuels. battery storage, gas storage, and biomethane supplies are identified
• Following applications made by businesses during the tariff suspension application window, the Government is temporarily exempting numerous goods from tariff duty until 2027, including plywood and a range of food stuffs

• It was reconfirmed that HMRC will reform its reward scheme for informants later this year, targeting serious non-compliance in large corporates, wealthy individuals, offshore and avoidance schemes. Rewards will be linked to a percentage of additional tax collected
• There will be more investment in debt management, expansion of the counter-fraud capability, and new technology and experts to target offshore non-compliance by the wealthy. Phoenixism, the practice of closing a company to avoid tax debts and other creditors only to replace it with a similar company, will be tackled, with more directors personally liable and more upfront payments
• We expect that the additional focus is likely to give rise to an increased level of tax enquiries and HMRC scrutiny for both directors involved in insolvencies and for wealthy individuals with offshore assets. The tax gap remains around 5%, which has been the same since 2017/18. We will see whether or not these proposals are overly ambitious

• A consultation has been published that explores options for simplifying and strengthening penalties for inaccuracies and failures to notify
• An increase to late payment penalties will apply for VAT taxpayers and self-assessment taxpayers as they join making tax digital from April 2025 onwards, to encourage taxpayers to pay on time
• Those in arrears will feel the bite of this immediately, and it makes managing tax debt even more difficult for the debtor. There is also a growing disparity between the interest rate on late payments and on repayments, 8.5% from 6 April, compared to 3.5% (staying the same) from 25th February
• Late payment interest and penalties can be a barrier to paying off debt, with a cycle of trying to clear older debts first, then incurring more penalties on the recent tax due. If you are struggling with this our tax teams can assist in liaising with HMRC debt management, helping you to get your tax affairs in order, and prompting you when payments are due

While as expected the Spring Statement was quiet on taxes, there are still significant changes that have been recently introduced and others on the way.

These include rate increases, in particular increases to various CGT rates, as well as the employers’ NIC rate rise from 13.5% to 15%, which came into effect from 6 April 2025.

More widescale reform includes: 

• the abolition of the non-dom regime from 6 April 2025, with the existing remittance based regime replaced by a residence based system alongside transitional arrangements
• the abolition of the more favourable furnished holiday let regime from 6 April 2025
• significant changes to IHT reliefs on agricultural and business property from 6 April 2026. Detail published by the Government on 27 February in a consultation paper provides some further clarification on how the Budget Day changes are intended to operate, and we will be responding to this consultation
• the reform of the business rates system to support the high street and boost investment.  We have already seen the publication of a discussion paper, with an interim report due in the summer, and further policy detail to follow at the Budget this Autumn.

The next fiscal event will be the Autumn Budget and it would not be a surprise to see further major tax changes announced then.

With tax change and uncertainty ahead, now may be a good time to review your tax position. Do get in touch if you would like to discuss any of the above further.

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