Spring Statement 2025

Last week, Chancellor of the Exchequer, Rachel Reeves, announced details of the Spring Statement.

As expected, cuts to the welfare state and civil service and an increase in defence spending were confirmed, so while there weren’t many surprises, the self-employed sector needs to be aware of a few key areas.

Here, we take a look at what you need to know:

National Living Wage

From the 1^st of April 2025, there will be an increase to the National Living Wage and National Minimum Wage rates:

• National Living Wage – £12.21
• 18-20 – £10.00
• 16-17 – £7.55
• Apprentices – £7.55

The government intends to create a single adult wage rate over time.

Making Tax Digital (MTD)

The rollout of Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) will be expanded to include a wider range of smaller sized businesses.

MTD for ITSA means having to keep digital records and submit quarterly tax returns using HMRC-approved software.

The year that this becomes mandatory will depend on earnings, for example:

• April 2026 – self-employed individuals and landlords earning more than £50,000
• April 2027 – those earning more than £30,000
• April 2028 – those earning more than £20,000

The government has said it will continue to explore how best to introduce digitalisation to those earning below the £20,000 threshold.

New late payment penalties for MTD

The government will increase late payment penalties for VAT taxpayers and Income Tax Self Assessment taxpayers as they join MTD for ITSA from April 2025.

The new rates are as follows:

• 0-14 day late – no penalty
• 15-29 days late – 3% of the amount outstanding at day 15
• 30+ days – 3% of the amount outstanding at day 15 + 3% of the amount outstanding at day 30

There will also be a penalty of 10% of the amount outstanding added per annum, on top of the penalties listed above.

Employers’ National Insurance Contributions

Unfortunately, the government did not make a U-turn on the Employers’ NIC increase – a move that was seen as a huge blow for all contractors, including those working through umbrella companies.

And so, from the 6^th of April 2025, the employer rate will increase from 13.8% to 15%.

Personal Allowance

The Income Tax personal allowance remains at the fixed level of £12,570 and will remain so until April 2028, however, it has been suggested that after this date, it will be uprated to keep in line with inflation.

Company Cars

The rates of tax for company cars will see a slight increase with the charge for zero-emission cars rising from 2% to 3%, with other cars increasing by 1%. The maximum benefit of 37% will remain.

Non-compliant tax advisors and tax avoidance schemes

The government will be bringing in tougher tax compliance and penalties for non-compliant tax advisors who promote aggressive tax avoidance schemes.

There will be an additional 500 HMRC compliance officers hired to investigate tax avoidance, as well as stricter penalties.

This means that any self-employed individuals who use either an accountant or an umbrella company for tax planning must ensure that they are compliant. It’s important to remember that those engaging in non-compliant schemes could face fines.

There will be four new consultations for targeting tax avoidance schemes:

1. Utilising Third-Party Data. A consultation on modernising HMRC’s acquisition and use of third-party data to help taxpayers get their taxes right the first time.
2. Behavioural Penalty Reform. A consultation on simplifying and strengthening penalties for inaccuracies and failure to notify.
3. Tackling Non-Compliant Tax Advisers. Enhancing HMRC’s powers to take swift action against tax advisers facilitating non-compliance.
4. Closing in on Tax Avoidance Promoters. Measures to target promoters of marketed tax avoidance.

If you need any further help, or you’d like to sign up, you can either contact us via our online chat, call one of our friendly experts on 01442 795 100 or email jaime.thorpe@dolanaccountancy.com.