Rachel Reeves’ Spring Budget delivered a mixture of announcements, bringing both potential opportunities and areas requiring careful consideration for individuals and businesses.
Understanding these changes is crucial to making informed financial decisions. Here we summarise the key takeaways that our clients need to be aware of, from evolving tax landscapes to new avenues of business support.
Economic Growth Downgraded
The headline takeaway for all businesses, was the slashing of GDP growth forecasts by the Office for Budget Responsibility (OBR). The OBR halved its forecast for GDP growth in 2025, from 2.0% to 1.0%, which suggests significant challenges for the UK economy over the next year.
While future year forecasts were slightly raised, the OBR suggested the risks to GDP growth are “substantial”, with “significant uncertainty” surrounding domestic and international economic developments. It has modelled scenarios for increased tariffs between the US and rest of the world, finding the potential for large impacts on UK GDP.
For businesses already facing challenging operating landscapes this will come as worrying news, and something that will require careful financial planning for the year(s) ahead.
Tax Changes and Implications
The Budget included changes that will affect higher earners, with adjustments to taxation that may increase the burden on those in this income bracket. If you’re earning around £100K or above, it will be important to review your financial plans to ensure you are making the most of available reliefs and allowances.
Making Tax Digital Updates
It was also announced that the rollout of Making Tax Digital (MTD) for Income Tax will be expanded to include a wider range of small businesses.
This builds on the government’s confirmation, at the Autumn Budget 2024, that MTD for Income Tax will start from April 2026 for sole traders and landlords with qualifying income over £50,000 and extend to those with incomes over £30,000 in April 2027.
MTD for Income Tax will now also be extended to sole traders and landlords with income over £20,000 from April 2028. The decision to reduce the threshold to £20,000 will ensure that 900,000 sole traders and landlords, who will now join MTD from April 2028, have the time they need to prepare for the changes.
Taxpayers will now also have to use third party software to submit quarterly returns, as HMRC’s free service will not be available.
Late Payment Penalties for VAT and MTD
Late payment penalties for VAT and Making Tax Digital (MTD) for income tax will increase from April 2025 to:
- 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.
Key Changes Previously Announced
These changes follow a number of previously announced updates that businesses and individuals will need to begin planning for, if they haven’t already:
- Tax thresholds frozen until 2028.
- Inheritance tax threshold frozen until 2030.
- National Living Wage rises in April 2025 to £12.21 per hour
Understand the Impact of the Spring Budget 2025 on your Business
We are committed to helping our clients navigate these changes. Whether it’s reviewing your tax position, helping you prepare for Making Tax Digital changes, or identifying opportunities for growth, we are here to provide tailored advice and support.
If you would like to discuss what these announcements mean for you, or your business, please get in touch with our team on 07722 188786 or at info@driveraccountancy.co.uk.
