Chancellor Rachel Reeves delivered the Spring Statement on 26 March 2025 and outlined a number of tax-related measures which were aimed at stimulating economic growth and addressing fiscal challenges. As expected, there were no major changes to tax rates with the 2025 Autumn Budget being the next likely event for any such changes.
Tax Thresholds and Fiscal Drag
The government will maintain the freeze on personal income tax allowances and National Insurance contribution thresholds until April 2028. This decision is expected to lead more taxpayers into higher tax bands due to inflation and wage increases—known as fiscal drag. Consequently, the government’s income tax receipts are projected to rise from £310 billion in the 2024-25 fiscal year to £378.5 billion by 2027-28.
Increased Penalties for Late Tax Payments
To enhance tax compliance, the government is increasing late payment penalties for taxpayers participating in the Making Tax Digital (“MTD”) programme. Starting from April 2025, VAT taxpayers will face higher penalties, with self-employed individuals and landlords earning at least £50,000 annually subject to these changes from April 2026. These measures are anticipated to generate an additional £1 billion for the Treasury over the next four years.
Crackdown on Tax Evasion and Avoidance
The Chancellor announced a series of initiatives to combat tax evasion and avoidance, including assigning more tax debts to private collection agencies, recruiting 1,100 new compliance staff, and consulting on stricter penalties for deliberate non-compliance and actions against rogue tax advisers. These efforts aim to bolster tax collection and compliance, with expectations of £7.5 billion in additional tax revenue by 2029-30.
Consultation on Cash ISAs
A consultation on whether to reduce the cash limit for ISAs was announced, with a review to reviewing the balance between cash and stocks and shares ISAs and allow more money to enter into economic circulation, thereby promoting the government’s growth agenda.
Pensions and inheritance tax
Changes to the inheritance tax treatment of pensions are still uncertain, although the consultation on bringing pensions into the inheritance tax net has now concluded. We have been promised draft legislation later in the year after which it is hoped there will be more clarity.