UK Spring Statement 2025: A New Era in Tax Enforcement and Compliance
The UK’s Spring Statement 2025, delivered by Chancellor Rachel Reeves, has ushered in a significant shift in the country’s approach to tax collection and compliance. This latest fiscal strategy is designed to bolster public finances, enhance tax enforcement, and ensure that all taxpayers contribute their fair share.
Crackdown on Tax Evasion and Avoidance
At the heart of the Spring Statement is a robust crackdown on tax evasion and avoidance. The government has committed to investing heavily in HMRC’s capabilities to tackle these issues. A key announcement includes an additional £87 million allocated to HMRC’s partnerships with private sector debt collection agencies. This investment is expected to yield a substantial return, with estimates suggesting it will bring in £1.3 billion over the next five years – a remarkable £16 for every pound spent.
To further enhance HMRC’s efficiency, £100 million has been earmarked to recruit an additional 500 compliance officers starting from April 2025. This move is projected to raise £241 million in unpaid tax over the next five years.
Increased Penalties for Late Payments
In an effort to incentivise timely tax payments, the Spring Statement introduces stricter penalties for late payments. From April 2025, late payment penalties for VAT and Making Tax Digital for income tax self-assessment will increase. The new rates will be 3 percent at 15 days, 3 percent at 30 days, and a significant 10 percent per annum for payments overdue by 31 days or more.
Reward Scheme for Informants
Inspired by successful models in the US and Canada, a new reward scheme will be launched to encourage informants to report serious non-compliance in large corporates, wealthy individuals, offshore schemes, and avoidance schemes. Informants will receive compensation linked to a percentage of the tax recovered as a result of their actions, ensuring the scheme is self-sustaining and effective.
Modernisation and Efficiency
The government is also investing in modernising HMRC’s systems and leveraging advanced technology to improve compliance work. This includes a pilot programme to test a new approach to recouping older unpaid tax debt, with £4 million allocated to this initiative. Additionally, HMRC will enhance its use of AI to target compliance work more effectively and make its staff more productive.
Employment Tax Changes
While the Spring Statement did not include any new tax increases, it did outline several employment tax changes that will impact businesses, particularly in the hospitality, retail, and care sectors. The National Minimum Wage will increase to £12.21 per hour, and the main rate of employer National Insurance will rise by 1.2 percent to 15 percent. The Employer Class 1 NIC Secondary threshold will also be reduced from £9,500 to £5,000 per year.
Simplification of Tax Administration
In a bid to make the tax system more efficient and user-friendly, the government has announced changes that will benefit side-hustlers and small businesses. Up to 300,000 taxpayers will no longer be required to file a tax return, with many able to pay their tax through a new simple online service. This move is part of the government’s commitment to driving forward efficiency reforms and simplifying the tax system.
Joint Efforts to Tackle Phoenixism
HMRC, Companies House, and the Insolvency Service are collaborating on a joint plan to tackle phoenixism – a practice where company directors avoid tax by declaring their companies insolvent. The plan includes increased use of securities and making rogue directors personally liable for their company’s taxes.
Defence and Welfare Spending
The broader fiscal strategy includes a £2.2 billion increase in defence expenditure and welfare spending cuts. These measures are part of a comprehensive approach to ensure fiscal stability and allocate resources effectively.
Conclusion
The Spring Statement 2025 marks a significant step forward in the UK’s efforts to enhance tax compliance and enforcement. With a focus on technology, efficiency, and stricter penalties, HMRC is better equipped than ever to tackle tax evasion and avoidance. For businesses and individuals, it is crucial to stay informed about these changes and ensure they are in compliance with the new regulations.
At Cutts and Co Accountancy, we are committed to helping our clients navigate these changes and ensure they are fully compliant with the evolving tax landscape. Whether you are a small business owner or an individual with a side hustle, our expert advice can help you make the most of the new tax reforms and avoid any potential pitfalls.
Stay ahead of the curve and let us guide you through the complexities of the UK tax system. Contact us today to learn more about how the Spring Statement 2025 affects you and your business.
