Spring Statement 2025

What you need to know about the Spring Statement

The Chancellor, Rachel Reeves MP, delivered a pared-back Spring Statement focused heavily on cuts to welfare spending to meet the fiscal rules and fund additional spend on high-tech defence. The Chancellor has kept her promise to avoid any further tax increases but measures to tackle tax evasion and the tax gap are back in the spotlight. The Statement focused on financial stability and economic growth through forward-planning, rather than any immediate changes.

The key points are:

Growth to reach 1% in 2025, 1.9% in 2026, 1.8% in 2027, 1.7% in 2028, and 1.8% in 2029.
Further crackdowns on tax evasion predicted to increase the tax take by £1 billion a year
Late payment penalties will increase for Making Tax Digital from April 2025
Defence spending will be increased by £2.2 billion this financial year, moving towards the full 2.5% of GDP target
A £400 million ‘defence innovation budget’ will be created, offering significant opportunities for technology and manufacturing businesses
Extra funding for affordable housing, with training funds for bricklayers, carpenters

What's next?

Tax compliance is in the spotlight – further crackdowns on evasion and increasing penalties were announced in the Spring Forecast.

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Tax announcements and consultations

The government has published proposals and consultations, some of which were expected, indicating possible changes to the below areas:

Tax debt collection: Third-party debt collection investment

The Government announced a significant expansion of HMRC's debt collection capabilities through third-party debt collection agencies. HMRC aims to recover substantial unpaid tax by increasing annual funding by £9 million to reach £44m yearly. There is another £4m for tackling older tax debts. The investment is projected to yield £155m in 2025-26 increasing to £570m by 2029-30, representing a return of approximately 15:1 on investment. This expansion targets the current £44.3bn tax debt of which £38.4bn is classified as 'available for pursuit'.

Tax debt collection: 600 additional debt management staff

Building on previous investments, the government will recruit 200 additional HMRC debt management staff annually starting April 2026 for three years. This measure focuses on later-stage debt collection to reduce the substantial backlog of overdue tax. The expected yield peaks at £425m in 2026-27, with projected returns continuing through the forecast period. The initiative builds on the 1,800 debt management staff announced in Autumn Budget 2024.

Tax compliance: 500 additional compliance staff

HMRC's strategic focus remains on addressing the tax gap. HMRC will recruit 500 new compliance officers beginning April 2025 to increase tax collection and reduce the tax gap, currently at 4.8% of theoretical tax liabilities (£39.8bn). This recruitment builds on last autumn's announcement of 5,000 additional compliance staff. The measure is forecast to yield £15m in 2026-27, growing to £95m by 2029-30.

Late payment penalties: Increased rates for digital tax systems

From April 2025, HMRC will implement higher late payment penalties as taxpayers join Making Tax Digital. Penalties will increase from 2% to 3% for tax unpaid after 15 days, and from 4% to 6% for tax unpaid after 30 days, with an additional 10% per annum charge for amounts outstanding beyond 31 days. These changes initially affect VAT taxpayers, extending to Income Tax Self-Assessment as taxpayers transition to Making Tax Digital, beginning with those earning over £50,000 from April 2026 and expanding to those with incomes above £20,000 from April 2028. This measure is expected to yield £125m annually by 2029-30.

Offshore tax non-compliance

The Government has outlined a significant overhaul of HMRC's approach to offshore tax non-compliance by the wealthy. It intends to deploy cutting-edge technologies and expertise to combat tax avoidance; recruiting specialists from private sector wealth management and leveraging artificial intelligence and advanced analytics to identify and challenge those attempting to hide their offshore wealth.

This initiative will see HMRC's resources dedicated to tackling wealthy offshore non-compliance increase by approximately 400 staff over the next five years. This strategic investment is estimated to yield substantial returns of over £500m by 2030.

The Government has launched a consultation to explore the potential of implementing a clearance system for Research and Development (R&D) tax reliefs. The consultation is open until 26 May 2025.

The consultation seeks views on whether a clearance system can effectively reduce error and fraud in R&D tax reliefs and streamline the R&D tax relief process to provide businesses with greater certainty and improve the overall customer experience.

There is currently low uptake of the existing advance assurance scheme, with around only 80 applications received in 2023/24.

The consultation explores the benefits and drawbacks of voluntary and mandatory assurances. Voluntary assurances might appeal to companies seeking certainty, while mandatory assurances could be more effective in reducing fraud and error.

The Government is also considering three stages at which assurance could be provided:

Pre-activity: Early discussions between companies and HMRC to identify and address uncertainties before R&D activities commence

Pre-claim: Assurances sought closer to the time of claim when R&D activities are underway providing and allowing more detailed scrutiny

Pre-payment: Companies could request checks before payment of credits to ensure that claims are compliant in order to reduce the risk of having to repay funds later

The Government acknowledges that full advance assurance for all is not feasible due to limited resources and expertise. Therefore, eligibility for clearances might be limited to growing and high-potential companies as well as sectors identified in the Government's Industrial Strategy. Mandatory assurances could be targeted at sectors with high non-compliance rates.

A potential change to improve deliverability would be the introduction of a de-minimis threshold for R&D claims. Historically, the SME R&D scheme included a de-minimis threshold set at £25,000 and then £10,000 before being removed. Reintroducing a threshold could free up resources to focus on larger, potentially more impactful claims.

Corporate entities delivering major projects, like the development of national infrastructure assets, can face uncertainty in forecasting the economic outcomes. Because of the scale and complexity of these projects, this uncertainty often includes the corporation tax treatment of some elements, which can act as a barrier to investment and growth. The Government is consulting on introducing a dedicated service for the very largest and most innovative investment projects, to provide statutory certainty over how tax rules will be applied if a project proceeds as planned. The aim is to launch the new service in 2026.

The Private Intermittent Securities and Capital Exchange System (PISCES) is a new type of stock market which will facilitate secondary trading of private company shares on an intermittent basis. The Government will lay secondary legislation in May 2025 to implement PISCES and trading on PISCES is likely to begin later in 2025. 

A draft statutory instrument has been issued providing exemption from Stamp Duty and Stamp Duty Reserve Tax (SDRT) for transfers of admitted PISCES shares in connection with trading activity that takes place on PISCES under the Financial Market Infrastructure sandbox arrangements.

A Technical Note was published confirming how employees will be taxed when trading shares on PISCES. The key points are:

Normal employment income rules apply when the shares are acquired (i.e. income tax on any discount, with Class 1 NIC due if the shares are readily convertible assets). Normal reliefs for tax advantaged share schemes (e.g. EMI or CSOP) apply.

Shares will fall under the ‘readily convertible asset’ rules if the shares are acquired when arrangements already exist for the shares to be traded on a PISCES  platform, or if the shares are acquired in anticipation of admittance to PISCES.

EMI and CSOP options can be exercised on a PISCES trading window if it is specified as an exercise event in the option agreement. Existing option agreements cannot be amended to include a PISCES trading window as a specified event.

Any amount subject to employment taxes on acquisition of the shares, or paid by the employee, forms the base cost of the shares for CGT purposes.

Normal principles of share valuation will apply for EMI and CSOP option grants granted over PISCES shares, with no ability to apply for an advance assurance mechanism to agree market values for PISCES events.

The Government will hold a series of roundtables during April with key stakeholders to discuss the role of Enterprise Management Incentive schemes, Enterprise Investment Schemes and Venture Capital Trusts in making the UK the best place to start and grow a business.

Alongside this, the Spring Statement Green Book hints at a future reduction in the £20,000 annual cash investment allowance in Individual Saving Accounts, as the Government looks to support growth by boosting retail investment in the stock market.

Tax Roadmap