April 2025

Technical and Client Update

In this issue

Spring Statement 2025

Self-assessment

Employment taxes

Taxes on capital assets

Business tax matters

Corporate taxes

Interest on unpaid tax liabilities

In conclusion

Tax data card 2025/26

Spring Statement 2025

On 26 March 2025, Chancellor Rachel Reeves presented her Spring Statement to parliament. Despite a backdrop of low economic growth and increasing government borrowing costs, the Chancellor remains committed to her ‘non-negotiable’ fiscal rules that aim to bring stability to the economy and security for working people. With further borrowing ruled out and a determination not to announce further tax changes, her focus has been on government spending, a review of which will be announced on 11 June 2025. This will allocate government spending for the three years from 2026/27 to 2028/29.

A number of the news articles below were announced on 26 March, as part of the Chancellor’s update.

Self-assessment

The High-Income Child Benefit Charge (HICBC)

You may have to pay the HICBC if your income exceeds £60,000 and child benefit is being paid in relation to a child that lives with you, regardless of whether you are a parent of that child. If you are living with another person in a marriage, civil partnership or long-term relationship, you will only be liable to the HICBC if you are the higher earner of the two of you.

For 2025/26, the HICBC is calculated at 1% of the child benefit received for every £200 of income above £60,000. This means that child benefit is fully clawed back where income exceeds £80,000.

From summer 2025, if you are an employee who is liable to pay the HICBC, you will be able to use a new digital service to declare the charge and opt to pay it directly through PAYE, without the need to register for self-assessment.

Digital record keeping and quarterly reporting requirements for traders and landlords (“MTD”)

Updates are continuing to come through on HMRC’s ‘Making Tax Digital for Income Tax’ (‘MTD for IT’) initiative. It will initially apply from 6 April 2026 for sole traders and property landlords who generated gross trade and rental income (‘qualifying income’) of more than £50,000 in the 2024/25 tax year.

This will be followed by those with qualifying income of more than £30,000 in the 2025/26 tax year being mandated to comply from 6 April 2027.

It has now been announced that those with qualifying income over £20,000 in 2026/27 will be mandated to comply from 6 April 2028.

The MTD for IT rules are mandatory and, if affected, you will be required to use ‘MTD-compatible software’ to maintain digital records and send a quarterly summary of your business and/or property income and expenses to HMRC. This will be in addition to an end-of-year tax return. It has now been confirmed that, for those mandated into MTD for IT, the end-of-year tax return must also be submitted using MTD-compatible software. It will not be possible to use a free HMRC online service.

Other MTD for IT changes announced at the Spring Statement were:

  • A limited list of types of individual who will have an exemption or deferral from MTD for IT.
  • The ability for those with 31 March year ends to start complying with the MTD for IT requirements on 1 April instead of 6 April, which will remove the need for manual adjustments at the start of the tax year.

We are continuing to develop a tailored strategy for our clients to ensure compliance with the new MTD requirements. We will contact those affected in the coming months.

Employment taxes

Please remember that the significant changes to the NICs paid by employers started to apply from 6 April 2025. An increase in the rate of employers’ NICs from 13.8% to 15% is combined with:

  • A decrease in the threshold at which an employer starts to pay NICs on each employee’s salary from £9,100 to £5,000*.
  • An increase in the amount of the ‘employment allowance’, which eligible employers can offset against their employers’ NICs liability, from £5,000 to £10,500.
  • A relaxation in the rules that determine which employers are eligible for the employment allowance. Until 5 April 2025, the employment allowance has only been available to businesses with a prior tax year employers’ NICs liability of less than £100,000. This rule no longer applies for 2025/26, meaning employers may be able to access the £10,500 allowance, even if their 2024/25 employers’ NIC cost exceeded £100,000. Other restrictions on claiming the employment allowance still apply (including a limit of just one allowance between connected employers), so please do check with us if you are unsure whether you are able to make the claim if we do not manage your payroll system.

* A higher threshold of £50,270 applies for employees who are under 21 and apprentices under 25. Other variations can also apply.

Taxes on capital assets

Capital Gains Tax (CGT)

As we head into 2025/26, it should be remembered that, for most sales of capital assets, CGT will apply at 18% for basic rate taxpayers and 24% otherwise. The Business Asset Disposal Relief (BADR) rate of CGT for eligible business disposals increased from 10% to 14%, with a further uplift to 18% planned for 6 April 2026.

Particularly in relation to business disposals, timing is important, so please do talk to us about optimising your tax position prior to any capital disposal.

IHT reliefs for business owners and farmers

The government is continuing with its plans to reform IHT agricultural property relief (APR) and business property relief (BPR) from 6 April 2026, with a consultation process underway on the particular impact when using trusts.

Relief of up to 100% of asset value is currently available on qualifying business and agricultural assets. From 6 April 2026, it is proposed that the 100% relief will apply on up to £1 million of combined agricultural and business property, with the relief reducing to 50% on the value that exceeds £1 million.

Another April 2026 change will reduce the BPR available on AIM shares and similar from 100% to 50%.

Care is needed when planning for these changes, as the rules are not yet certain and even gifting before 6 April 2026 will not necessarily achieve the desired effect. Please do talk to us about how best to organise your estate with business or agricultural assets.

Business tax matters

Electronic invoicing

The government has recently launched a consultation on the possible advantages of e-invoicing, which include productivity enhancements, cashflow acceleration and error reductions. It also considers how HMRC can support investment and encourage uptake within the business community.

Trading with the USA and other international partners

While uncertainties around global trade and tariffs continue, the government is expressing ambitions to support digitalised trade and supply chains, bringing cross-border trade into the 21st century.

In particular, a new digital pilot with the USA to test ways to speed up trade processes for USA and UK businesses will soon commence.

Corporate taxes

Research and Development (R&D) tax reliefs

With ongoing focus on the availability of R&D tax reliefs and companies' eligibility to claim them, the government is now consulting on widening the use of ‘advance clearances’ from HMRC. This initiative intends to give companies greater certainty when planning R&D investment, while also improving the taxpayer experience and reducing error and fraud.

Voluntary advance assurances are already part of the R&D tax relief regime, but they are not commonly utilised. The consultation considers a framework where future assurances become mandatory in certain areas, namely those where HMRC are concerned about the risk of incorrect claims.

The consultation also considers whether, in future, a minimum expenditure threshold should apply to R&D reliefs, noting that a threshold of £25,000 used to apply in the past. 

Tackling ‘phoenixism’

HMRC is expanding its efforts to tackle ‘phoenixism’ (or tax-driven business cessations followed by business start-ups), whereby company directors go insolvent to evade tax and write off debts owed to others.

HMRC, Companies House and the Insolvency Service will deliver a joint plan to tackle rogue directors who abuse the insolvency regime. The plan includes an increase in the use of securities, where HMRC asks for an upfront payment of tax from new companies. More directors will be made personally liable for the taxes of their company and there will be an increase in the number of enforcement sanctions.

Interest on unpaid tax liabilities

From 6 April 2025, the late payment interest rate charged by HMRC on unpaid tax liabilities increased by 1.5 percentage points. For most taxes, this will set late payment interest at the Bank of England base rate plus 4%.

The above developments reinforce the importance of keeping your tax affairs up-to-date and adequately budgeting for future tax liabilities. Flexible ‘time to pay’ arrangements can sometimes be agreed with HMRC.

In conclusion

The Spring Statement was an economic update given in challenging circumstances, in what was regularly referred to as a ‘changing world’.

Remember, we are here to work alongside you to ensure your business and personal success. Please do get in touch if there is anything that you would like to discuss.

Download the Spring Statement Summary

Tax data card 2025/26

A copy of our 2025/26 Tax Rates Card, which summarises many of the rates and allowances fundamental to our business and personal lives is available to download. We are sure that you will find it as a useful point of reference throughout the coming tax year.

Our tax card is intended for use as a quick point of reference. Should you require any further information, have a simple question or require detailed advice, please do not hesitate to contact us.

Download the Tax Rate Card