Rachel Reeves’ Spring Statement on March 26 was expected to be fairly understated, especially when compared to the dramatic tax changes of last year’s Autumn Budget. True to expectations, the there was an emphasis in the Spring Statement on spending rather than tax, although there were still some tax measures announced which were of note, a key focus being on reducing the “tax gap” (the difference between the amount of tax that should in theory be paid, and the amount that is actually paid):
- The government will continue its clampdown on tax avoidance and evasion. The Chancellor announced that there will be further measures to raise over £1 billion in additional gross tax revenue by 2029/30. There will also be steps taken to address the stock of tax debt (at December 2024, unpaid tax liabilities owed to HMRC amounted to over £44 billion), including a “test and learn” pilot to collect older debts, in addition to recruiting a further 500 HMRC compliance staff, over and above the 5,000 new compliance staff whose recruitment was announced last Autumn. Further measures will include an expansion of HMRC’s counter -fraud capabilities, a reward scheme for informants and tackling “phoenixism”, essentially contrived company insolvencies to avoid paying debts, including tax. Consultations have also been released to explore ways of simplifying the penalty regime and provide stronger deterrents for tax avoidance, and ways of improving the quality of data acquired by HMRC from financial and other organisations.
- Late payment penalties will be increased for VAT taxpayers and income tax self-assessment taxpayers as they join Making Tax Digital (MTD) from April 2025 onwards. The new rates will be 3% of the tax outstanding where tax is overdue by 15 days, plus 3% where tax is overdue by 30 days, plus 10% per annum where tax is overdue by 31 days or more.
- The continued rollout of MTD for Income Tax Self-Assessment. This will extend to sole traders and landlords with incomes over £20,000 from April 2028, an acceleration of the previously anticipated rollout timeframe. HMRC will not provide taxpayers who are in scope of MTD with an online filing service for year-end. They will, therefore, need to use specialist software.
Whilst the lack of further major tax increases may be welcomed, it appears that the significant changes announced in October 2024 are still on course to be implemented by the government. These include:-
- From April 2025 – The introduction of a new residence-based system to determine the scope of Inheritance Tax (IHT) on an individual’s estate, and changes to employers’ national insurance contributions and changes to the national minimum and living wage rates.
- From April 2026 – Changes to the IHT treatment of Agricultural Property Relief (APR) and Business Property Relief (BPR);
This will see the introduction of a £1m allowance for assets qualifying for 100% APR/BPR. Draft legislation has not yet been published but it has been confirmed that this £1m allowance will not be transferrable between spouses and civil partners. As a result, early planning is key in order to consider maximisation of available allowances and reliefs, and appropriate structuring.
- From April 2027 – the bringing in of many pensions into the scope of IHT. Again, this marks a very significant change and planning will be key in order to mitigate or at a minimum defer any IHT charge which might arise.
Going forward, it appears that the Autumn Budget will be the Chancellor’s previously-stated one major fiscal event of the year. Given the significant changes which are already in the pipeline, planning ahead is essential.
