Chancellor Rachel Reeves’ Spring Statement 2025, delivered on 26 March, arrived at a critical point for the UK economy. With the Office for Budget Responsibility downgrading growth forecasts to just over 1% for the year and borrowing costs climbing, the tone of the statement was more pragmatic than bold. The Chancellor focused on reforming the tax system, encouraging economic resilience, and driving public sector efficiency.
What she did not deliver is an easing of the Employers’ NIC and other business tax increases timed to commence April 2025.
Several key announcements were of direct interest to taxpayers, business owners, and advisers – especially those connected to tax compliance, digitalisation, and HMRC powers. Below is a summary and commentary on the most relevant developments.
Making Tax Digital: A cautious but firm step forward
The most significant administrative update was the proposed, phased extension of Making Tax Digital for Income Tax (MTD for IT). The new timeline will see sole-traders and landlords with income over £20,000 required to join from April 2028. It had already been notified that those with relevant income over £50,000 per annum would come into the new regime from April 2026, with the threshold reducing to £30,000 from April 2027. Those earning less than £20,000 remain outside of the scope for now, though the door remains open for further inclusion after evaluation.
Key points:
• Quarterly digital updates will be required
• Use of MTD-compatible software is mandatory
• HMRC is promising better support, including for digitally excluded taxpayers
This longer runway reflects lessons from the somewhat bumpy rollout for VAT. Reeves has chosen to pair technology adoption with a broader simplification agenda, aiming to reduce burdens on small businesses. However, concerns remain that HMRC's own systems are not yet robust enough to support a seamless experience.
Closing in on promoters of tax avoidance
The government has published a consultation titled “Closing in on Promoters of Marketed Tax Avoidance,” targeting schemes that promise to artificially reduce tax liabilities. This builds on previous reforms but includes:
• New penalty models for scheme promoters
• The introduction of strict liability criminal offences for serial promoters
• Enhanced HMRC powers to publish names of enablers earlier in the process
• Measures to disrupt schemes at the planning stage, not just after the fact
This is part of a broader policy trend that shows HMRC is shifting focus from reactive enforcement to proactive disruption. The goal is to make the UK an increasingly hostile environment for tax avoidance outfits operating on the margins of legality.
Behavioural penalties reform
HMRC has launched a consultation on overhauling its behavioural penalties regime, which applies to errors in tax returns or failures to notify chargeability. The key aims are to:
• Simplify the rules, which are widely considered complex and hard to apply consistently
• Introduce clearer thresholds for when penalties apply
• Make penalties more proportionate and responsive to actual behaviour, such as whether a taxpayer took reasonable care
This is long overdue. The current system penalises errors and failures inconsistently, especially where reasonable care or human error can be demonstrated.
Research and Development tax relief: Advance clearance proposals
The R&D tax relief regime continues to be a hot topic. While the merger of Small & Medium Enterprises (SME) and Research 7 Development Expenditure Credit (RDEC) schemes has already taken place, a new consultation explores the option of widening the use of advance clearances for R&D tax claims.
This could allow businesses to:
• Secure upfront agreement from HMRC on whether their projects meet R&D criteria
• Reduce the need for post-claim reviews and enquiries
• Improve certainty and reduce fraud and error, which have dogged the scheme
There’s no firm policy yet, but HMRC is clearly seeking a route to streamline processes and prevent abuse – especially after high-profile clampdowns on rogue advisers in the R&D claims space.
Better use of new and improved third-party data
Another forward-looking move is HMRC’s proposal to improve how it collects and uses third-party data under its bulk data-gathering powers. The aim is to:
• Expand sources of data that HMRC can draw upon
• Improve data quality and accuracy
• Use data more effectively to pre-fill returns, prompt compliance, and detect anomalies
Examples might include:
• Gig economy platforms providing earnings information
• Banks and payment processors offering transaction-level insights
• Real-time property income data from letting platforms
This is similar to pre-filling tax returns in some Scandinavian countries and could drastically improve tax administration if handled correctly.
Enhancing HMRC’s powers over non-compliant tax advisers
Alongside its focus on avoidance schemes, HMRC is consulting on tougher measures against tax advisers who facilitate non-compliance. This includes:
• New civil and criminal sanctions
• Expanding information powers to uncover hidden adviser-client relationships
• Public naming of advisers with track records of enabling tax avoidance
This aligns with a broader international trend towards holding professional enablers accountable, especially in high-value tax fraud cases.
Broader fiscal context and spending commitments
Outside of tax, the Spring Statement confirmed the government’s commitment to:
• A defence spending increase to 2.5% of GDP by 2027
• £3.25 billion for a new public sector transformation fund focusing on AI and tech
• Further work on the childcare and work incentives agenda to encourage people into employment
The welfare reform package – including changes to Personal Independence Payments (PIPs) and Universal Credit – has drawn criticism from some quarters, particularly disability rights groups. However, the Treasury is standing firm on needing to reduce what it calls "unsustainable welfare spending."
Final thoughts
Spring Statement 2025 didn’t deliver any dramatic tax rate changes or giveaways, but that was never likely. Instead, it focused on long-term system modernisation, stricter enforcement, and targeted reforms that could reshape how HMRC interacts with taxpayers and advisers.
For tax professionals and small business owners, the key takeaways are:
• The expansion of MTD for IT is real, though delayed
• Compliance standards are being tightened, with emphasis on behaviour and third-party data
• HMRC wants to be more proactive, both in stopping avoidance and in supporting legitimate claims, like R&D
• The next few years will require investment in systems, understanding of HMRC’s new powers, and ongoing engagement with consultations
None of these changes will happen overnight, but the direction of travel is clear: more digital, more data-driven, and more interventionist.