Like the previous government, the current one has committed to one major fiscal event per year, being the Autumn Budget, with the Spring Statement intended to be an update on the state of the economy with little substantive policy changes being announced. However, against the backdrop of a stagnant economy and global trade uncertainties arising from the US trade tariff changes, this does feel like a crucial point for the UK and Rachel Reeves.
Having said that, we do not expect any major new announcements – primarily because of the large tax increases already announced in October 2024 with the majority coming into effect in the next few weeks. Overall, what we are far more likely to see are details around spending cuts rather than tax increases.
Given the effect some of the announced changes in National Insurance and Inheritance Tax Reliefs in particular is already having on the business world, it is entirely possible that there may be some alterations to some of the impending changes to ease the impact in certain key sectors
Below I explore some of the key areas where changes are already coming, and where further adjustments may be made.
National Insurance
This was the biggest of the tax rises from October, and from April the Employers’ rate will increase from 13.8% to 15%. Alongside this, the threshold for each employee will decrease from £9,500 to just £5,000. However the Employment Allowance is increasing from £5,000 to £10,500 per year, which will provide some relief to the smallest businesses.
Given the impact this will have on certain sectors, there have been calls for, in particular, charities and the care sector to be exempt from the increases. It is therefore possible we may see some relaxations for these or other sectors such as hospitality. Alternatively, there could be a further increase in the Employment Allowance to provide more support to small businesses.
Inheritance Tax
The proposed cuts to Agricultural and Business Property Reliefs are not due to come into play until 2026, but this has been perhaps the most emotive change in terms of the country’s reaction, with farmers in particular facing the prospect of large tax bills when farms are passed to the next generation, with no cash or liquid assets available to fund them.
It is possible that the government may change the rules to limit the impact, perhaps by raising the threshold for farmers to help smaller farms in particular.
Capital Gains Tax
We have already seen significant CGT increases, with the main rate moving up to 24% in the middle of the tax year. The stepped increase in the reduced Business Asset Disposal Relief rate from 10% to 14% from 6 April 2025, and 18% from 6 April 2026, has already had a marked impact on business deals.
As such, further CGT increases are unlikely, certainly in this Statement. However depending on the economy in Autumn, we would not rule out the possibility of further increases being announced at the Autumn Budget.
Income Tax
The big question here is around personal allowances, which are currently frozen until 2028, and pulling more and more low earners and pensioners into tax every year. It is possible the freeze may be extended for a further two years to 2030 – however given that this is three years away it is too early to say whether the government will need to increase taxes in that way by then. We therefore consider it unlikely as an announcement this year, but expect that the government will keep this as an option for them to announce over the next year or so, should they consider the need.
There was a very recent announcement that those with “side hustles” such as Ebay and Vinted traders would not need to register for self assessment unless their annual sales exceed £3,000. However the tax free trading allowance remains at £1,000, meaning HMRC will need to introduce a separate reporting system for those in between these brackets. This change is from April 2026 so there is a year for HMRC to come up with this, but although it appears to be a simplification by reducing the numbers in self assessment, the introduction of yet another reporting system brings yet further complication to the tax landscape.
Other areas
Other areas where we may see movement include the following:
- Pension funds becoming liable to Inheritance Tax from April 2027 – could there be a U-turn or relaxation here?
- The Stamp Duty threshold for properties is due to drop back from £425,000 to £300,000 in April. Could this be an area where the higher threshold could be extended for a bit longer to stimulate economic activity in the property market?
- The annual cash ISA limit is currently £20,000, and there has been speculation that this may be significantly reduced, in order to encourage more investment into stocks and shares ISAs.
The Autumn Budget also promised quite a few consultations for Spring 2025, but there is likely to be a separate Tax Administration and Maintenance (TAM) day, probably in April, which would most likely be the time for major consultations to be released.
Tax Simplification is also likely to feature quite heavily, although any government ambitions in this area are constantly hampered by further changes, and any limited reliefs against the impending tax rises will only serve to introduce further complexities.
As ever our team of tax experts will be following the speech next week and subsequent document publications very closely and will provide our analysis shortly after the event.
If you have any questions for our Tax experts please contact us on 01242 776000 or tax@randall-payne.co.uk.
