Against a backdrop of global economic uncertainty and increased borrowing costs, Chancellor Rachel Reeves delivered her Spring Statement for 2025 today as she attempts to navigate the balance between long-term responsibility and meeting the immediate needs of the country.
As expected, no major tax changes were announced. This may come as a welcome relief for some following the drastic changes for non-doms presented in the Autumn Budget last year, which will come into effect from 6 April 2025 (see our article for details of the Autumn Budget).
Instead, the statement outlined the necessity to support investment into the economy, including national defence, closing the tax gap and housing initiatives, while also looking at welfare reform and reductions in funding for certain governmental departments.
While the statement was mainly focused on the UK’s economic forecast, there were some details included in the policy documents that have some relevance to our clients, and we outline below the “headlines” for your reference.
Non-dom update
While the statement confirms that the non-dom changes will progress as planned, the government has confirmed that they will continue to work with stakeholders to ensure the UK remains internationally competitive. Irrespective, there do not appear to be any last-minute incentives to encourage clients to remain in the UK, with many non-doms having either already left or firmed up plans to cease residence from April 2025.
Consultations to reduce the tax gap
Four new consultations have been announced to assist with closing the (as reported at 31 December 2024) £44 billion tax gap. These are focussed on the following:
- Using third-party data to increase automation. This is aimed at reducing requests for information that HMRC will need to issue to taxpayers, for example, as part of a tax enquiry.
- Enhancing HMRC’s ability to take actions against tax advisers involved in facilitating non-compliance from their clients.
- Measures to take further steps against promoters of tax avoidance schemes. Such schemes are usually highly controversial and essentially fail when investigated, and so increasing the prevention of such schemes from being widely marketed will ultimately help protect clients.
- Strengthening and simplifying penalties for inaccuracies on tax returns and penalties for the failure to notify HMRC of a tax liability.
Some of the proposals discussed within these consultations include expanding HMRC’s counter-fraud capabilities in relation to tax fraud, introducing a reward scheme for informants of tax non-compliance and increasing measures to combat “pheonixism” (effectively evading tax liabilities via the insolvency of a company). These all appear to be sensible measures, if approved, although tax advisers across the country could be forgiven for thinking an obvious solution to help close the tax gap would be for HMRC to “man their phone lines” more effectively.
Making Tax Digital (MTD)
The continued roll-out of MTD for Income Tax Self Assessment was also confirmed for sole traders and landlords with income over £20,000. This is due to be implemented from April 2028. However, the MTD scheme and its application for these individuals has already been pushed back a number of times, and so it remains to be seen whether these measures will actually go ahead or will be delayed indefinitely.
As always, if have any questions on how these measures will affect your tax affairs, or the affairs of your clients, then please do not hesitate to contact us.
Jon Elphick,
BA (Hons), ATT (Fellow), ADIT
Managing Tax Partner
Email: jelphick@mdaviesassociates.com
Telephone: + 44 (0) 203 770 5602
Nick Tayler,
BA(Hons), CA, CTA
Senior Tax Manager
Email: ntayler@mdaviesassociates.com
Telephone: + 44 (0) 203 770 5605