Spring Statement 2025: At a glance

The Chancellor, Rachel Reeves, presented her Spring Statement on 26 March 2025. It walked the tightrope of keeping to the Government's fiscal rules and not increasing taxes while addressing a £14bn deficit in public finances. The Chancellor confirmed that the Office of Budget Responsibility (OBR) had cut its growth forecast for the coming year in half from 2% to 1%.

Spring_Statement_2025

Introduction

In the Spring Statement, the Chancellor sought to update Parliament and the nation on the economy, public finances and progress against the Government’s economic objectives. The Statement was accompanied by the publication of an Economic and Fiscal Forecast from the Office for Budget Responsibility (OBR). 

In October 2024, the current Government set its new fiscal rules, which formed the backdrop of the Spring Statement. Broadly, the Government intends:

  • That day-to-day public spending, such as on welfare and public services, will be met by revenue by 2029-30.
  • Net financial debt to fall as a share of UK economic output in 2029-30.

The Chancellor reaffirmed her commitment to one major fiscal event per year, meaning tax announcements were limited in this update, with a spending review due to occur in June 2025, followed by a full Budget in Autumn 2025. 

The Chancellor began her speech by emphasising that the "world was changing before our eyes" and that both global security and the global economy faced a more uncertain world. It was announced that:

  • Defence spending was to reach 2.5% of GDP by April 2027
    • This would be paid by a reduction to the overseas aid budget to 0.3% of gross national income.
    • There would be an immediate increase in the defence budget by £2.2bn in 2025-26.
    • Reform of the procurement process would be undertaken.
    • A minimum of 10% of the Ministry of Defence's equipment budget will be spent on new technologies.
  • The Treasury will set out plans to "increase the number of tax fraudsters charged each year by 20%" by HMRC.
  • Welfare cuts would provide net savings of £3.4bn.
  • Pressing ahead with planning reform will help build over 1.3 million homes in the UK within the next five years.
  • A further £13 billion of capital investment would be made over the Parliament, in addition to the £100 billion uplift announced in the Autumn Budget. 
    • £600m would be spent to train up to 60,000 more construction workers.
    • This includes 10 new technical excellence colleges across every region of the country,

Index to sections below

Making Tax Digital for Income Tax (MTD for IT)

Continued rollout of MTD for IT

  • Sole traders and landlords with qualifying income over £20,000 will join MTD for IT from April 2028.
    • The Government will explore how the benefits of digitalisation can be brought to more of the around four million taxpayers who have income below the £20,000 threshold.
  • Additional taxpayer groups will be exempt from MTD for IT, and those needing to submit the residence and remittance pages on the tax return will not be required to join until April 2027.  
  • Changes will be implemented that require MTD users to submit their tax return through a MTD compatible software product. 
  • Taxpayers with an accounting date of 31 March will be able to operate MTD from 1 April in the first year of operating MTD to avoid the burden of manual adjustments at the year's end. 

See More taxpayers into MTD by 2028

Late payment penalties

From 1 April 2025:

  • The Government will increase late payment penalties for Income Tax Self Assessment taxpayers as they join MTD from April 2025 onwards, "to encourage" taxpayers to pay on time.
  • 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.

See Penalties: Late Payment

Companies

Consultation: R&D reliefs advance clearances

  • A consultation has been published on widening the use of advance clearances in R&D tax credits to help reduce error and fraud, provide certainty to businesses, and improve taxpayer experience.
  • The consultation closes on 26 May 2025.

See R&D consultation on advance clearance procedure

Consultation: advance tax certainty for major projects

  • A consultation has been published on proposals for a new process to provide increased tax certainty in advance for major projects.
  • An appropriate threshold level will ensure only dozens rather than hundreds of projects are serviced annually. It is likely the level will be for qualifying expenditure in the hundreds of millions.
  • The consultation closes on 17 June 2025.

See Consultation on tax certainty for major projects

Employers/employees

PISCES: tax implications for employees in relation to selling their shares on PISCES

Income Tax

High-Income Child Benefit Charge (HICBC)

From summer 2025:

  • Employed individuals liable to the HICBC will be able to report their family’s Child Benefit payments through a new digital service and opt to pay HICBC directly through PAYE, without needing to register for Self Assessment.

See High-Income Child Benefit Tax Charge

Individual Savings Accounts (ISAs)

  • The Government is looking at options for reforms to ISAs that get the balance right between cash and equities to earn better returns for savers, boost the culture of retail investment, and support the growth mission.

See ISA guide

Stamp Taxes

Private Intermittent Securities and Capital Exchange System (PISCES): exemption from Stamp Duty and Stamp Duty Reserve Tax

Compliance & Administration

Late payment penalties (also noted above for MTD)

From 1 April 2025:

  • The Government will increase late payment penalties for VAT taxpayers (and Income Tax Self Assessment taxpayers as they join MTD from April 2025 onwards, noted above) "to encourage" taxpayers to pay on time.
  • 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.

See Penalties: Late Payment

Direct recovery of tax debts by HMRC

  • HMRC will restart 'direct recovery' of tax debts owed by individuals and companies who have the ability to pay but choose not to.
  • The Government will also explore options to automate the collection of lower-value tax debts.

See Direct recovery of Debts (enforcement by deduction from accounts)

Closing the tax gap: investment

The Government has announced measures to close the tax gap and raise over £1 billion in additional gross tax revenue per year by 2029-30.

  • There will be £87m of investment in HMRC’s debt management capacity over the next five years, including an innovative test and learn pilot to collect more aged debts and move towards more automated debt recovery.
  • Over the next five years, the Government is investing £100m in recruiting 500 more HMRC compliance staff and £114m to recruit an additional 600 HMRC debt management staff.

Closing the tax gap: wider measures

The Government says it is committed to taking stronger action against the most egregious behaviours that lead to lost revenue and impact others, such as tax fraud, which hurts legitimate businesses and finances other crimes. This includes action to: 

  • Prosecute more tax fraudsters.
    • HMRC is expanding its counter-fraud capability to increase the number of annual charging decisions for the most harmful fraud by 20%, compared to current levels, from 500 to 600 per year by 2029-30.
  • Reform rewards for informants.
    • A new HMRC reward scheme for informants will be launched later this year, targeting serious non-compliance in large corporates, wealthy individuals, offshore and avoidance schemes.
    • The new scheme will reward informants with compensation linked to a percentage of any tax taken as a result of their actions.
  • Tackle 'phoenixism'.
    • HMRC, Companies House and the Insolvency Service are delivering a joint plan to tackle those using contrived insolvencies to evade tax and write off debts owed to others.
    • This includes increasing the use of upfront payment demands, making more directors personally liable for company taxes, and increasing the number of enforcement sanctions to double the amount of tax-protected to £250 million by 2026-27.

HMRC are overhauling the approach to offshore tax non-compliance by the wealthy, recruiting experts in private sector wealth management and deploying AI and advanced analytics to help identify and challenge those who try to hide their wealth.

During the next five years, the government will increase HMRC’s resources assigned to tackling wealthy offshore non-compliance by around 400 people, who are expected to bring in over £500 million over the forecast period. 

Closing the tax gap: consultations

Closing in on promoters of tax avoidance consultation

  • The Government is seeking views on proposals in four areas to close in on promoters of tax avoidance: 
    • Expanding the scope of the Disclosure of Tax Avoidance Schemes (DOTAS) regime.
    • Introducing a Universal Stop Notice and Promoter Action Notice.
    • Tackling controlling minds and those behind the promotion of avoidance schemes through new highly targeted obligations and stronger information powers.
    • Exploring options to tackle legal professionals designing or contributing to the promotion of avoidance schemes.
  • The consultation closes on 18 June 2025.

See Consultation on closing in on promoters of tax avoidance

Behavioural penalties reform: consultation

  • This consultation seeks views on options to simplify and strengthen HMRC’s behavioural penalties for inaccuracies and failures to notify to provide a stronger deterrent for those who deliberately avoid paying what they owe.
  • Areas considered include: removing minimum penalty levels; simplifying categories for type and quality of disclosure; introducing proportionate penalties for repeat offenders; and options to simplify the penalty suppression regime.
  • The consultation closes on 18 June 2025.

See Consultation: Reform of Behavioural Penalties

Enhancing HMRC's ability to tackle tax advisers facilitating non-compliance: consultation

  • This consultation explores options to enhance HMRC’s powers and sanctions to take swifter and stronger action against professional tax advisers who facilitate non-compliance in their clients' tax affairs.
  • Aims include: exploring proposals making it easier for HMRC to gather information from tax advisers where HMRC believe their actions have led to non-compliant behaviour, disclosing concerns to professional bodies, and broadening the scope of publishing details of tax advisers who are the subject of HMRC sanctions. 
  • The consultation closes on 7 May 2025.

See Consultation on tackling tax advisers facilitating non-compliance

Better use of new and improved third-party data: consultation

  • This consultation seeks views on opportunities for improving the quality of data acquired under HMRC’s bulk data-gathering powers for tax administration.
  • The consultation closes on 21 May 2025.

See Better use of new and improved third-party data

Other announcements (some previously announced, but reaffirmed in the Spring Statement)

Building Safety Levy

From 1 October 2026: 

  • New residential developments in England (with certain exemptions) will incur the Building Safety Levy to raise revenue to be spent on building safety.
  • The Government has published a response to its technical consultation on this policy.
  • Exemptions include affordable housing and developments with fewer than ten units. Previously developed land also benefits from a 50% reduced rate to help ensure these sites remain viable.

Cost Contribution Arrangements (CCAs)

  • The Government has reviewed the transfer pricing treatment of Cost Contribution Arrangements as set out in the Corporate Tax Roadmap and has set out how businesses can obtain improved certainty on the transfer pricing treatment of such arrangements through the UK’s existing Advance Pricing Agreement programme.
  • See: Advance tax certainty for major projects consultation (this announces the outcome of the review of the transfer pricing treatment of CCAs).

Climate Change Levy (CCL): Consultation on the treatment of electrolytic hydrogen in CCL and the changing energy context

  • The Government is committing to removing CCL costs from electricity used in electrolysis to produce hydrogen and is consulting on the best route to do so via legislative changes.
  • The government will also conduct a wider CCL review.
  • Consultation: Climate Change Levy: electrolytic hydrogen and energy context

External links

HM Treasury: Spring Statement 2025