The UK Spring Statement 2025 is expected to bring several tax changes and considerations, many of which will impact both businesses and individuals. Here’s an overview of the key tax predictions and proposals that could shape the economy:

Frozen Tax Allowances & Thresholds

The government has frozen tax allowances and thresholds until 2028, which is considered a “stealth tax” as it causes more people to pay higher taxes as their wages increase with inflation. There’s speculation that this freeze could be extended by another two years, according to a report from the House of Commons Library.

Income Tax Thresholds for Higher Rates

There’s talk about potentially reducing the threshold for the 45% additional rate of income tax from £125,140 to £100,000. While this seems unlikely, it’s not entirely out of the realm of possibility.

Employer National Insurance

From 6 April 2025, the Employer National Insurance rate will increase from 13.8% to 15%, and the threshold at which it is payable will decrease from £9,100 to £5,000. There is speculation that further increases in Employer National Insurance could be introduced.

Employment Allowance

The Employment Allowance, which helps small businesses with National Insurance costs, will rise from £5,000 to £10,500 starting in April 2025. There may be new conditions for its use, potentially limiting how businesses can benefit from it.

Employee National Insurance

Although no major changes to employee National Insurance are proposed yet, some predict that the Chancellor could reverse the 2% NIC cut made by Jeremy Hunt in January 2024. Such a reversal would be unpopular but could generate significant revenue.

National Living Wage (NMW)

While not a tax change, the National Living Wage will rise by 6.7% from £12.21 per hour starting 1 April 2025. This will affect workers but not tax policies directly.

Individual Savings Accounts (ISAs)

There has been much debate over reducing the annual investment limit for cash ISAs from £20,000 to a lower amount, possibly as low as £4,000. It’s also speculated that the Lifetime ISA could be scrapped entirely.

Pension Tax Relief

There could be discussions about moving towards a flat rate of pension tax relief, an idea many Chancellors have considered before. A consultation on this may be possible in the future.

Pensions and Inheritance Tax

From April 2027, pensions are expected to be brought into the scope of Inheritance Tax, which could penalize those who have saved into pension pots. This could be reconsidered depending on political and economic pressures.

Capital Gains Tax (CGT)

CGT rates were increased in the Autumn Budget, but there’s speculation that the government could raise them further. Additionally, Business Asset Disposal Relief (CGT rate for selling businesses) will increase from 10% to 14% from April 2025, affecting business owners selling their companies. Rumors persist that CGT rates could eventually align with income tax rates.

Inheritance Tax (IHT)

There are plans to restrict Business and Agricultural Property Reliefs starting in April 2026. Further restrictions could be introduced, including changes to lifetime gifts and the 7-year window for potentially exempt transfers.

Wealth Tax

The Chancellor has rejected a 2% wealth tax for now but has left open the possibility of considering it in future Budgets if needed to address fiscal challenges.

Double-Cab Pickups (DCPUs)

From 6 April 2025, most double-cab pickups will be treated as cars for tax purposes, affecting business expense deductions, capital allowances, and benefits in kind.

Furnished Holiday Lets (FHLs)

The tax regime for Furnished Holiday Lets (FHLs) will end for individuals from 6 April 2025 and for companies from 1 April 2025. This could signal further tax increases for landlords.

Non-Dom Regime

Major changes to the non-domiciled tax regime will take effect from 6 April 2025, particularly affecting individuals based on their residency status.

Stamp Duty

Stamp Duty will be reformed with the threshold dropping from £425,000 to £300,000 starting 1 April 2025, which will increase the amount of tax payable on property purchases.

Corporation Tax

No changes are expected to Corporation Tax rates, although there may be additional consultations or reforms in the future.

Business Rates

The discount for business rates in retail, hospitality, and leisure will be reduced from 75% to 40%, which will affect many businesses in these sectors.

Council Tax

Council tax rates are expected to see significant increases across many councils starting 1 April 2025, as local governments seek to meet their budget needs.

Tourist Tax

There is consideration being given to the introduction of a tourist tax in certain cities, potentially increasing costs for visitors in popular destinations.

Digital Services Tax

Rumors suggest that the Digital Services Tax, which targets large tech companies like Amazon, Apple, and Google, could be watered down or scrapped as part of a trade deal with the US.

Tax Returns

There are rumors that penalties for late submission of personal tax returns and late payment of taxes could increase, aiming to improve tax compliance and generate more revenue.

The UK Spring Statement 2025 is expected to bring a combination of tax hikes, freezes, and new policies, targeting a wide range of areas from income taxes to business rates. While some of these changes may not be fully confirmed, they reflect ongoing fiscal challenges and the government’s attempt to balance economic growth with necessary public sector funding. Keep an eye on further announcements as the Budget approaches to see how these predictions play out.

UK Spring Statement 2025 (Tax)