Tax News Archives - Vale & West Blog

Spring Statement 2025

March 25, 2025 By Vale & West

Chancellor Rachel Reeves today delivered her Spring Statement, outlining the Labour Government’s economic priorities and reaffirming a commitment to fiscal discipline and long-term investment.

Billed as the start of a “decade of national renewal,” the Statement acknowledged global uncertainty but marked a clear shift towards stability and responsibility at home.

While less headline-grabbing than last year’s Autumn Budget, the absence of major announcements is telling.

“No further tax changes” may sound reassuring, but it also signals no new relief in sight for businesses and their owners.

Beneath the surface, the Statement includes several important developments worth noting:

“No further tax increases” – and no support for businesses!
The UK’s economic outlook in “a changing world”
Labour’s tax evasion crackdown
Changes to MTD for ITSA: Quietly announced, massively important
Reeves reminds us of changes made last year
Minor issues – still noteworthy
The real impact of the Spring Statement

“No further tax increases” – and no support for businesses!

Despite stating that “this Labour Government was elected to bring change to our country”, the Chancellor has declined this opportunity to alter tax policy.

When Reeves confirmed there would be “no further tax increases” beyond those introduced in the Autumn Budget, it was met with jeers in the Commons.

While a freeze on tax rises might sound like welcome news for individuals concerned about their personal liabilities, the reality for business owners is more disappointing.

In practice, no tax changes means no new support for businesses already feeling the pressure.

There are no fresh reliefs, no easing of existing burdens, and no incentives to spur investment, innovation, or growth.

Businesses that had hoped for reform to Corporation Tax, cuts to National Insurance, or enhanced allowances for capital expenditure and R&D will find no comfort in this Statement.

At a time when many enterprises are still recovering from rising employment costs, interest rates, and ongoing uncertainty, the absence of tax-based support could dampen confidence.

Stability is welcome – but stagnation is not. For businesses looking for signals of a pro-growth agenda, this silence may speak volumes.

The UK’s economic outlook in “a changing world”

The Chancellor repeatedly referred to “a changing world” in her speech, citing the war in Ukraine as a driving factor (though avoiding comment on President Trump’s tariff-heavy policy).

Due to economic uncertainty, the Labour Party’s priority will be on stability, national investment and defence spending (more on this below).

Despite this, Reeves announced that the OBR has upgraded its GDP growth forecasts for each year from 2026 to 2029, with the economy now expected to be larger by the end of the forecast period than previously predicted in the Autumn Budget.

The specific figures she outlined include GDP growth of:

1.9 per cent in 2026
1.8 per cent in 2027
1.7 per cent in 2028
1.8 per cent in 2029

The hope for many businesses upon hearing this news must be that of optimism.

Economic development could support stronger investment, hiring and growth before the end of the decade.

Therefore, regardless of Reeves’ consistent referrals to economic uncertainty, GDP is expected to outperform previous Budget predictions – a positive takeaway for all.

Labour’s tax evasion crackdown

The Chancellor announced a further crackdown on tax evasion, aiming to increase prosecutions of tax fraud by 20 per cent and take total revenue raised from reducing tax evasion to £7.5 billion.

She emphasised fairness, stating that it is wrong for some to avoid taxes while working people pay their share.

For businesses, stronger enforcement helps level the playing field, ensuring competitors are not gaining an unfair advantage by dodging their obligations.

For individuals, it reinforces trust in the tax system and ensures public services are funded without raising taxes.

The extra revenue could also reduce pressure for future tax increases, supporting broader economic stability.

Changes to MTD for ITSA: Quietly announced, massively important

One of the most significant updates in the wider Spring Statement document (but, interestingly, not included in Reeves’ speech), was the confirmation of the phased rollout of Making Tax Digital for Income Tax Self-Assessment (ITSA).

From April 2026, the scheme will apply to sole traders and landlords earning over £50,000 and for those earning over £30,000 in 2027. Now, this is expanding to those with income above £20,000 by 2028.

This gradual lowering of the threshold means around 900,000 sole traders will be brought into the MTD regime by 2028.

As part of this scheme, HMRC will be cracking down on late payments of both VAT and Self-Assessments.

Previously taxpayers would incur a penalty of two per cent of the tax owed if the outstanding tax was not paid within 15 days and four per cent if the tax was not repaid within 30 days.

Now, taxpayers within the MTD scheme will face a 3 per cent charge on any outstanding tax if it remains unpaid after 15 days, with a further 3 per cent added if the amount is still overdue at 30 days.

In addition, the annualised interest rate applied to late payments will more than double – rising from the current 4 per cent to 10 per cent.

Those who are yet to react to MTD for ITSA due to the small scale of their business operation will now need to act quickly to avoid being caught outside of the scheme in the years to come.

Reeves reminds us of changes made last year

One of the key aspects to note was the reminder of previous tax changes made by the Government in the Autumn Budget.

Whilst Reeves noted the fact that these changes provided a foundation of a stronger economy, it’s worth remembering exactly where this “strength” comes from.

An increase in the lower and higher rates of Capital Gains Tax to 18 per cent and 24 per cent respectively.
An increased Employers National Insurance rate to 15 per cent from 13.8 per cent and a reduction of the threshold from £9,100 to £5,000.
Abolishing the UK’s non-domicile regime and introducing policies to tax non-doms on their worldwide income.
An increase in Stamp Duty Land Tax from three per cent to five per cent and a reduction in thresholds for first-time buyers.
The introduction of VAT charges to private school fees.
Changes to Business Asset Disposal Relief (BADR) that will take effect in the coming years. The current 10 per cent rate will remain until 6 April 2025, after which it will increase to 14 per cent, and then to 18 per cent from 6 April 2026.

Reeves made no attempt to roll back the previous changes – confirming that these increases are still going ahead.

Her Statement should serve as a timely reminder for business owners and individuals to revisit their tax planning strategies.

Just because today’s announcements lacked major surprises does not mean it is time to be complacent.

Minor issues – still noteworthy!

Whilst seemingly unrelated to the broader impact on businesses that this Spring Statement holds, there were minor points raised in Reeves’ announcement that deserve your attention.

For example:

Individual households £500 better off: Reeves told the Commons that the OBR now expects real household disposable income to grow at nearly twice the rate forecast last autumn, with households set to be £500 better off on average under this Government. This could lead to increased consumer spending and boost demand for goods and services – which is good for businesses.
Labour sticks to housebuilding promise: The Chancellor stated that Labour policies would “lead to housebuilding reaching a 40-year high” which is good news for a construction sector already crumbling under pressure.
Taking aim at defence spending: Reeves confirmed a £2.2 billion boost in defence spending, with at least 10 per cent of the equipment budget going towards advanced technologies like drones and AI. The investment will support manufacturing hubs in areas such as Glasgow, Derby, Newport, and Barrow, creating thousands of skilled jobs and new business opportunities.
Chancellor insists that inflation targets are achievable: Reeves said inflation, which peaked at 11 per cent under the previous Government, is on track to reach the 2 per cent target by 2027. This should offer greater price stability, helping businesses plan, invest, and manage costs with more confidence.
Unexpected freeze to benefit claimants: Reeves confirmed a £4.8 billion cut to welfare, including a 50 per cent reduction and freeze of the Universal Credit health element for new claimants – an unexpected move not signalled last week.
ISA reform on the horizon: Though not mentioned in the Chancellor’s speech, the larger document released at the same time hints at potential reforms to Individual Savings Accounts (ISAs) to “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.” This could mean a decrease in the tax-free allowance currently offered by these savings vehicles.

While not the headline announcements, these points could still have meaningful implications for both individuals and businesses.

One might see these as hints at broader economic shifts – and opportunities – that are worth keeping an eye on.

The real impact of the Spring Statement

While this Spring Statement may have lacked headline-grabbing reforms, its message was clear: stability first, change later.

For individuals, there are small signs of progress – rising household incomes, a firmer grip on inflation, and continued investment in defence and infrastructure.

For businesses, however, the Statement brings more caution than comfort.

There is no rollback of last year’s tax rises, no fresh reliefs, and no new incentives to drive growth or innovation.

Yet amidst the silence, there are signals – economic forecasts are improving, consumer spending may rise, and targeted investment could support job creation and local economies.

If the Autumn Budget was about making bold moves, the Spring Statement is about holding the line.

Now is the time for business owners and individuals to assess their position and review their tax planning strategies with their accountant.

To read the full Spring Statement released by the Government, please click here.

Autumn Budget 2024

October 30, 2024 By Vale & West

A new Government, a new Chancellor and a new approach to the UK’s fiscal policies.

Rachel Reeves entered her first Budget with a strong message that her measures would lead to “an economy that is growing, creating wealth and opportunity for all”.

To achieve this, she made it clear that the “only way to drive economic growth is to invest, invest, invest”.

Echoing the last Labour Government’s pledge on “Education, Education, Education” more than 14 years ago, the Chancellor was quick to recognise that there was difficult work ahead with slow economic growth and a £22 billion hole in the public purse.

Recognising her position as the UK’s first female Chancellor of the Exchequer, she pulled no punches about the inheritance that the Government had found and the impact that it would have on her plans as she set out to raise taxes by £40 billion.

She launched into a speech containing a series of policies that would not seek shortcuts but would instead focus on generating economic stability in the long term.

Labour promised a “painful” Budget and the measures confirmed will certainly be challenging for many, as her speech focused on:

Economic Outlook
A Tax on Employment
Capital Gains Tax
Inheritance Tax
Overseas Wealth
Business Tax
Invest, Invest, Invest
Final Thoughts

Economic Outlook

While the Labour Party inherited a black hole of £22 billion, the economic outlook for the UK looks more positive.

The Chancellor said that the Government aimed to build on this to bring “balance and stability” to economic growth, with a focus on long-term goals.

Looking at the OBR’s forecast, real GDP growth will be:

1.1 per cent in 2024
2.0 per cent in 2025
1.8per cent in 2026
1.5 per cent in 2027
1.5 per cent in 2028
1.6 per cent in 2029

To ensure this economic stability is reflected in the nation’s finances, Rachel Reeves has committed the Government to a new set of financial rules.

Under this new approach to fiscal policy, the Government will not borrow to fund current spending and will instead rely on higher taxes to ensure an end to austerity.

Instead, borrowing will only be reserved for investment that benefits Britain’s future.

A Tax on Employment

Before the Budget, the Chancellor and Prime Minister reaffirmed their commitment to not increase Income Tax, VAT and National Insurance for ‘working people’.

Interestingly, the rumoured extension to the tax freeze beyond 2028 also did not go ahead, with personal tax rates in 2028-29 rising in line with inflation.

Instead, Ms Reeves set out changes to employers’ National Insurance Contributions (NICs) that will raise an additional £25 billion.

This huge injection of cash into the public finances will be raised by increasing the rate of employer NICs by 1.2 percentage points from 13.8 per cent to 15 per cent from 6 April 2025.

If this change wasn’t significant enough, the threshold (per employee) at which employers begin paying NICs will decrease from £9,100 to £5,000 per year.

To help the smallest of businesses, the Employment Allowance will increase from £5,000 to £10,500, while also removing the existing £100,000 threshold on employers' Class 1 National Insurance liabilities.

The National Living Wage (NLW) will rise by 6.7 per cent to £12.21 per hour from April 2025 – adding £1,400 to the annual earnings of a full-time worker on the NLW.

The National Minimum Wage (NMW) for 18-20-year-olds will also increase by 16.3 per cent to £10.00 per hour – the largest rise ever in both cash and percentage terms.

The Government is also working towards a unified adult wage rate and has tasked the Low Pay Commission (LPC) with recommending a minimum wage for 18-20-year-olds that will gradually bridge the gap with the main NLW rate.

Capital Gains Tax

One of the most immediate and substantial changes in the Budget was an increase in the standard Capital Gains Tax (CGT) rate.

From today, the main rates of CGT will change as follows:

Lower rate – Increases from 10 per cent to 18 per cent
Higher rate – Increases from 20 per cent to 24 per cent

The separate CGT rates for property disposals will remain unchanged.

However, those looking to dispose of a business or a significant shareholding via a sale or succession should take note of changes to Business Asset Disposal Relief (BADR).

The CGT rates for BADR and Investors’ Relief will increase to 14 per cent from 6 April 2025 and match the main lower rate of 18 per cent from 6 April 2026.

The lifetime limit for Investors’ Relief will be reduced to £1 million for all qualifying disposals made on or after 30 October 2024, aligning it with the existing lifetime limit for Business Asset Disposal Relief.

Inheritance Tax

For those hoping to pass on wealth to the next generation, there was more bad news with significant changes to two key elements of an individual's estate.

The Government is tightening the Inheritance Tax (IHT) system by imposing the tax on unspent pension pots from April 2027 and cutting back the benefits of agricultural property relief and business property relief.

Despite existing nil-rate bands and exemptions, the 100 per cent relief will only apply to the first £1 million of combined agricultural and business assets, dropping to 50 per cent after that – adding pressure on family farms and businesses.

The Government also plans to reduce business property relief to 50 per cent across the board for shares “not listed” on recognised stock exchanges, like AIM.

Also, while the tax rates on Income Tax will be unfrozen from April 2028, for IHT the nil-rate bands will remain unchanged until April 2030.

Overseas Wealth

As planned, the Labour Party will abolish the current non-dom tax status from 6 April 2025.

In its place, it will introduce a new residence-based regime. Individuals opting into the regime will get a short-term break, avoiding UK tax on foreign income and gains for only the first four years of tax residence.

However, from 6 April 2025, the Government will introduce a strict residence-based system for Inheritance Tax, effectively ending the use of offshore trusts to shield assets from IHT.

The 50 per cent reduction in foreign income in the first year, previously proposed by the last Government, will be scrapped entirely.

For Capital Gains Tax, remittance basis users can rebase foreign assets to 5 April 2017 upon disposal under restrictive conditions, offering limited benefit, while overseas Workday Relief will remain but in a reformed, restrictive format.

In addition, the Temporary Repatriation Facility will be extended to three years with expanded scope to offshore structures.

Business Tax

To provide certainty to businesses looking to invest and grow, the Chancellor left the existing Corporate Tax rates and reliefs relatively untouched.

In its Corporate Tax Roadmap, the Government has confirmed that it will retain the cap on the rate of Corporation Tax at 25 per cent.

It also reiterated that it remained committed to maintaining the UK’s generous R&D tax reliefs and world-leading capital allowance offer. Full Expensing, the Annual Investment Allowance, and the Patent Box scheme will all stay the same.

Businesses will also be able to benefit from an extension to the 100 per cent first-year allowances for zero-emission cars and electric vehicle charge-points to 31 March 2026 for Corporation Tax and 5 April 2026 for Income Tax.

Invest, Invest, Invest

The key message of the Government’s speech was the promise to invest in long-term growth.

To achieve this capital investment will be boosted by more than £100 billion over the next five years, with a focus on transport, housing and R&D.

Alongside this investment, the Government has reiterated its commitment to the National Wealth Fund, which will bring together private and public sector funding to encourage more than £70 billion of private investment.

The Government has also introduced plans for a forward-looking Industrial Strategy to boost investment in key growth sectors and initiated a pensions review aimed at unlocking more investment in UK growth assets.

Final Thoughts

For small and medium-sized companies this latest Budget will be a blow, both for the organisation itself and its owners.

The significant hike in National Insurance and the National Living Wage will more than likely limit job creation, suppress wage increases and add unwanted ongoing costs to businesses still struggling with a cost-of-living crisis.

Changes to Capital Gains Tax and Inheritance Tax will also restrict the ability of business owners to generate wealth from their enterprise and pass it on.

However, if Labour can achieve its promised investment in national growth and calm the markets with its promises of innovation and Corporation Tax certainty then the nation may benefit from greater economic prosperity.

Those people who find themselves facing uncertainties about their future plans as a result of this Budget must seek professional advice urgently.

To read the full Autumn Budget document, please click here.

Potential tax increases and their impact on businesses

July 10, 2024 By Vale & West

In recent reports, former Prime Minister Sir Tony Blair has forecasted potential tax increases that could have an impact on businesses across the UK.

The Tony Blair Institute’s chief economist predicts taxes may need to rise by 1.9 percentage points of GDP by the end of this Parliament to stabilise debt, potentially equating to over £50 billion.