As we step into Spring, change is in the air—not just in the seasons, but in the economy too. Chancellor Rachel Reeves has delivered her Spring Statement 2025, setting out the government’s latest plans in response to ongoing economic challenges. With a focus on stability, investment, and fiscal responsibility, here are the key takeaways you should know:
My key takeaways:
- Increased government capital expenditure of £2b per year – good news for construction, utilities, defence and tech
- Increased AI spend – £3.25bn transformation fund to reform the public sector – good news for tech
- £2.2bn boost for defence
- £600m to train up 60,000 more construction workers
- Utilising the apprenticeship levy funding to get more young people into work
- Consider apprenticeships, where employers pay no national insurance contributions (NIC) for employees under 25 who are paid at the basic rate
- Veterans: no employer NIC at the first job
- Employer NIC is waived for new hires in Freeports and Investment Zones for the first £25,000
- Workers under 21 who are basic rate taxpayers are exempt from employer NIC
What should employers be thinking about?
- The OBR has upgraded the forecast for the next year and every year thereafter. It predicts GDP growth of 1.9% in 2026, 1.8% in 2027, 1.7% in 2028 and 1.8% in 2029
- Cutting-edge tech will help the HMRC crackdown on tax avoidance, raising a further £1bn, taking the total to £7.5bn
- The Ministry of Defence will receive a £2.2bn funding boost next year, with 2.5% of GDP to be spent on defence each year. This will be achieved by reducing overseas aid spending to 0.3% of gross national income
- There will be a minimum spend of 10% on the MoD’s equipment budget on tech such as drones and AI. This will boost production in locations such as Derby, Glasgow and Newport
- Inflation in 2025 will average 3.2% and will reach the Bank of England’s 2% target from 2027 onwards, the OBR have said
- Measures to address the third runway at Heathrow, planning and pension reform, and deregulation will take place
- Housebuilding will reach a 40-year high, say the OBR, hitting 305,000 homes a year by the end of the forecast period and 1.3 million homes over the next five years. This is close to the manifesto promise of 1.5m within this parliament
HMRC has launched two consultations aimed at tackling advisors promoting tax avoidance. We have seen an increase in providers saying they will minimise or eliminate NIC for businesses through various schemes. These schemes should be approached with caution.
Making Tax Digital
The Spring Statement 2025 included several announcements regarding Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA):
- Extension of MTD for ITSA: The government will expand MTD to sole traders and landlords with income over £20,000 from April 2028.
- This means that:
- Sole traders and landlords with income above £50,000 will join from April 2026
- Those with an income above £30,000 will join from April 2027
- Those with income over £20,000 will join from April 20281
- The Government also announced today that there would be further exemptions and deferrals for certain taxpayer groups, such as non-residents.
- The government has yet to finalise the policy framework for MTD and penalty reform.
- HMRC will begin contacting affected taxpayers from April 2025 to raise awareness and help them prepare for the changes.
Have any questions? Please contact Kyle Newton, Tax Partner
Take a look at our recent blog on how employers can mitigate the rising National Insurance costs.
