Spring Statement 2025: A Digital and Data-Driven Future

Key announcements included no relief for Employers' NIC and other business tax increases starting in April 2025. The statement focused on tax compliance, digitalisation, and HMRC powers. There were important developments in these areas. 

In line with Labour’s desire for only one major fiscal event per year, there were no new tax announcements. There were also no U-turns on the changes previously announced for April 2025 – some details have been changed, however.   

Let’s take a more in-depth look at the upcoming tax and revenue changes

Making Tax Digital (MTD) for Income Tax: The phased extension of MTD for IT will begin in April 2028, requiring sole traders and landlords with income over £20,000 to join. Quarterly digital updates and MTD-compatible software will be mandatory, with HMRC promising better support for digitally excluded taxpayers. 

This timeline reflects lessons from the VAT rollout, aiming to reduce burdens on small businesses while addressing concerns about HMRC's system robustness. 

Targeting Tax Avoidance:

The government launched a consultation titled "Closing in on Promoters of Marketed Tax Avoidance," introducing new penalty models, strict liability criminal offences for serial promoters, enhanced HMRC powers to publish names of enablers earlier, and measures to disrupt schemes at the planning stage.

HMRC is shifting focus from reactive enforcement to proactive disruption, making the UK a hostile environment for tax avoidance. 

Behavioural Penalties Reform:

HMRC's consultation on overhauling its behavioural penalties regime aims to simplify rules, introduce clearer thresholds for penalties, and make penalties more proportionate and responsive to actual behaviour.

Prioritising education could reduce errors without harshly penalising honest mistakes. 

Research and Development (R&D) Tax Relief:

A new consultation explores advance clearances for R&D tax claims, allowing businesses to secure upfront agreement from HMRC on whether their projects meet R&D criteria.

This could save time, money, and stress for legitimate claimants, though the process must be accessible and efficient to avoid bottlenecks. 

Improving Third-Party Data Use:

HMRC proposes to expand sources of data, improve data quality and accuracy, and use data more effectively to pre-fill returns, prompt compliance, and detect anomalies.

Examples include gig economy platforms providing earnings information, banks offering transaction-level insights, and real-time property income data from letting platforms. 

Enhancing HMRC's Powers Over Non-Compliant Tax Advisers:

HMRC is consulting on tougher measures against tax advisers who facilitate non-compliance, including new civil and criminal sanctions, expanding information powers to uncover hidden adviser-client relationships, and public naming of advisers with track records of enabling tax avoidance.

HMRC aims to weed out persistent offenders who enable grey-market schemes. 

Broader Fiscal Context and Spending Commitments:

The Spring Statement confirmed the government's commitment to increasing defence spending to 2.5% of GDP by 2027, allocating £3.25 billion for a new public sector transformation fund focusing on AI and tech, and further work on childcare and work incentives to encourage employment.

The welfare reform package has drawn criticism, particularly from disability rights groups, but the Treasury is firm on reducing "unsustainable welfare spending." 

The expansion of MTD for IT will impact small businesses by requiring the use of HMRC-approved software for tax filing and maintaining detailed digital records for six years.

Transitioning to digital tools may incur costs, but workshops and resources are available to help businesses streamline their accounting practices.

Needless to say, Naylor Accountancy Services can help here. All our systems and processes are already MTD compliant and we have a suite of digital tools can enhance efficiency and reduce errors in tax filing, saving time and minimising the risk of penalties for non-compliance.  

HMRC promises better support for digitally excluded taxpayers, aiding small businesses in navigating the new requirements. The phased extension of MTD for IT will begin in April 2028, giving small businesses time to prepare for the changes. Expanding MTD aims to reduce common errors contributing to the UK's tax gap and help businesses transition to digital operations.

While the shift to MTD for IT may present challenges, it also offers opportunities for improved efficiency and accuracy in tax filing and business insights. With the right support and resources, small businesses can successfully navigate these changes and benefit from the new digital tax system. 

The Spring Statement 2025 focused on modernising systems, stricter enforcement, and targeted reforms to reshape HMRC's interactions with taxpayers and advisers. 

Key points for tax professionals and small business owners include the expansion of Making Tax Digital for Income Tax (MTD for IT), tightening compliance standards, and HMRC's proactive measures to prevent tax avoidance and support legitimate R&D claims. The direction is clear: more digital, data-driven, and interventionist. 

Naylor Accountancy Services offers comprehensive support for taxpayers who may struggle with tax filing, digital or otherwise.

We provide proactive financial planning, efficient record-keeping using cloud-based accounting software like Xero, QuickBooks, or Sage, digital expense tracking tools, and detailed tax planning and compliance services. 

If you have any questions about the impact of the 2025 Spring Statement, Naylor Accountancy Services or need further assistance, please don't hesitate to contact us.

For more information please review our services, events, or book a free consultation to discuss how we can support your business needs. 

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