The UK Chancellor, Rachel Reeves, delivered her Spring Statement on 26 March 2025, alongside an economic and fiscal forecast from the Office of Budget Responsibility. As expected, the statement focused on welfare and spending cuts rather than tax increases, in line with the Chancellor’s commitment to a single major fiscal event each year (the Autumn Budget).
While no tax hikes were introduced, two key themes emerged from the supporting tax documentation and consultations: closing the tax gap and encouraging economic growth.
Closing the Tax Gap
The government reaffirmed that closing the tax gap is essential to restoring economic stability. Measures expected to generate over £1 billion per year by 2029-30 include:
HMRC Debt Management and Compliance Expansion: An additional 500 compliance staff will be recruited (on top of the 5,000 announced previously). The “Making Tax Digital” (MTD) initiative will be extended to more small businesses, improving tax compliance.
Increased Late Payment Penalties: VAT and income tax self-assessment penalties will rise from 2% to 3% at 15 days, from 2% to 3% at 30 days, and from 4% to 10% from day 31, effective April 2025.
Enhanced Fraud Prevention: HMRC’s counter-fraud capabilities will be strengthened to prosecute more tax fraud cases, including those involving large corporations.
US-Style Whistleblower Scheme: A new scheme will encourage reporting of serious tax non-compliance.
Combatting “Phoenixism”: Increased enforcement against directors who dissolve businesses to evade tax liabilities, including upfront payment demands and expanded personal liability measures.
AI-Driven Wealth Detection: HMRC will recruit private-sector wealth management specialists and deploy AI to detect hidden wealth.
Regulation of Tax Advisers: A consultation on holding tax advisers accountable for facilitating non-compliance will run until 7 May 2025.
Crackdown on Tax Avoidance: New measures will target promoters and enablers of tax avoidance schemes, expanding the scope of the Disclosure of Tax Avoidance Schemes (DOTAS) regime (consultation open until 18 June 2025).
Enhanced Data Collection: Financial institutions and card service providers will be required to improve tax data reporting (consultation open until 21 May 2025).
Plans for Economic Growth
The statement included several consultations aimed at providing businesses with tax certainty and fostering investment:
R&D Tax Relief Advance Clearances: A consultation (open until 26 May 2025) seeks feedback on improving the clearance system to reduce errors and fraud.
Advance Clearance for Major Investment Projects: A proposed voluntary system will allow large-scale corporate investors to gain advance clarity on tax rules, particularly for projects of national or strategic significance (consultation open until 17 June 2025).
Cost Contribution Agreements: Businesses will be able to seek transfer pricing certainty through the UK’s Advanced Pricing Agreement programme.
Support for Entrepreneurs and Scale-Ups: The government will engage with entrepreneurs and venture capital firms to review tax relief schemes, including the Enterprise Management Incentive Scheme and Venture Capital Trust Scheme, through a series of roundtables in April.
Trading Shares on PISCES: A technical note outlines tax implications for employees trading shares on the upcoming Private Intermittent Securities and Capital Exchange System (PISCES), set to launch in 2025. A draft statutory instrument proposes exemptions from Stamp Duty and Stamp Duty Reserve Tax.
Business Rates Reform: An interim report on business rates reform will be published in the summer, with further policy details expected in the autumn budget.
Outlook and Industry Response
Despite economic challenges, including low UK growth, concerns over employer NIC increases, and global instability, the Chancellor reiterated a commitment to economic stability, certainty, and growth. While the announced tax consultations are welcomed, their impact on business growth may not be immediate. Given fiscal constraints and the broader global economic climate, concerns remain over potential further spending cuts or tax increases in the autumn budget.
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