The Chancellor has handed down her Spring Statement today, 26 March 2025. Previously she had announced that she wants to do the bulk of the tax-related heavy lifting in an annual Autumn Budget. As expected, the Statement did not announce any major tax changes, however, there are still several changes taking effect from 6 April 2025 to be aware of.
Stamp Duty Land Tax
From 1 April 2025, the £250,000 dwellings nil-rate band, assuming there is no five per cent supplement halves and resets at £125,000. First-time buyers are in the “cross hairs” too. Currently first-time buyers do not have to pay SDLT on purchases up to £425,000 with five per cent SDLT on the excess insofar as the price does not exceed £625,000. From 1 April 2025 these thresholds are reset at £300,000 and £500,000. If the upper £500,000 limit is exceeded there will be no relief, as is the case with the current rules. The changes were cemented by the last government and the Chancellor has offered no reprieve.
Employer’s NIC
From 6 April 2025 the rate of employer’s NIC will increase from 13.8 per cent to 15 per cent. Further, the threshold at which employers pay NIC on an employee’s salary will fall from £9,100 to £5,000. These measures are high profile, and the Chancellor has confirmed that she will be continuing with the plan she announced last autumn. Employers may wish to flex reward packages to recognise remuneration in the current tax year to make best use of the lower rates.
Band freezes
As previously announced, income tax bands and allowances will remain frozen until 6 April 2028. In particular, the threshold for higher rate (40 per cent) income tax will remain at £37,700 and the threshold for additional rate (45 per cent) income tax will remain at £125,140.
Inheritance tax has not been exempted from the freeze either. The £325,000 nil-rate band will be frozen at that level until 6 April 2028. Historically bands and allowances have increased with the new tax year. However, this time, there will be no spring thaw in the new tax year.
Capital gains tax
From 30 October 2024, the rate of capital gains tax on disposals by individuals and trustees increased from 20 per cent to 24 per cent.
However, individuals and trustees can, in certain circumstances, qualify for business asset disposal relief from capital gains tax, which can result in shares in trading companies or assets being used for a trade being taxed at a 10 per cent capital gains tax rate, subject to a £1m annual allowance.
The Chancellor has announced that the capital gains tax rate for gains-qualifying for business asset disposal relief will increase to 14 per cent from 6 April 2025 and, again, to 18 per cent for gains on disposals after 6 April 2026. These increases will need to be thought about in the structuring of any deal which falls near to the tax year end.
There are tricky transitional rules which may catch transactions that are structured to swerve around the rate increases and there are complications with loan notes too.
Foreign Income and Gains (FIG)
From 6 April 2025, the UK introduces a new regime for non-UK resident individuals who become UK tax resident in relation to non-UK source income and capital gains.
Currently individuals who become UK tax resident, but who remain domiciled outside the UK, may be able to claim the remittance basis on their non-UK source income and capital gains. Essentially, individuals who fall within this favoured category will not be subject to UK tax on such non-UK source income and gains unless and until such income and gains are remitted to the UK. Non-UK domiciled individuals lose this favourable treatment if they have been resident in the UK for at least 15 of the 20 tax years before the tax year in question.
This treatment will continue to apply for all tax years ending on or before 5 April 2025. However, from 6 April 2025, a new set of rules will apply, namely the FIG. Under FIG, individuals who become UK tax resident after ten tax years of non-UK tax residence will be able to claim a four tax year exemption from tax on their non-UK source income and capital gains.
There are clearly swings and roundabouts with these new rules. When you look just at time limits, the four tax year limit for FIG is less generous than existing rules. Nevertheless, there is a big win here in that, if the FIG is successfully claimed, the non-UK source income and gains are exempted from UK income and capital gains tax in their entirety, even if such income and gains are remitted to the UK.
Internationally mobile employees
Internationally mobile employees are now a routine part of the workforce. For example, non-UK resident individuals regularly work for UK employers by way of short-term secondments. Unfortunately, the PAYE rules have not kept pace with modern employment practices.
In particular, the PAYE rules create the risk that, where a secondee to the UK works both inside and outside the UK, the employer is required to deduct PAYE on the portion of the remuneration which relates to the non-UK work, as well as the portion which is attributable to UK work. Clearly this is an unfair outcome as only the UK work should be subject to PAYE. Thankfully, from 6 April 2025, HMRC should introduce an expedited procedure to prevent PAYE being deducted from the non-UK work, subject to compliance checks down the line.
Corporation tax transfer pricing: no timetable
The transfer pricing rules require that the price used for tax return purposes to calculate the supply of goods and services should be on an arms’ length basis where the supplier and the recipient of the supply are connected and where the actual price is different from the arms’ length price.
Currently there are exemptions from these rules, notably for small and medium-sized enterprises. The Chancellor has announced a consultation on limiting the scope of this exemption for small and medium-sized enterprises, which would mean that more bench marking of transactions would need to be carried out to establish if they are at arms’ length. However, the Chancellor has not announced a timetable yet, from when this reform will take effect.
Payrolling benefits in kind: to take effect from 6 April 2026
The Chancellor has confirmed that she plans to press ahead with the payrolling of benefits in kind which will take effect from 6 April 2026. This is not as dry a measure as it first appears.
Currently the Income Tax on benefits in kind is collected under self-assessment on 31 January after the end of the tax year rather than on a monthly basis via PAYE. By moving the tax collection on benefits in kind into monthly PAYE there will be a one-off acceleration in tax collection. producing a valuable benefit for the Exchequer.
There is also an employer’s national insurance benefit for the Government too. Currently employer’s NIC on benefits in kind is reported to HMRC on P11D (b) on 6 July after the end of the relevant tax year. The plan is to move the collection of this NIC into the monthly PAYE system producing an acceleration in National Insurance collection, which is similar to the acceleration which will be created for Income Tax.
Inheritance tax business property relief: to take effect from 6 April 2026
Last October, the Chancellor announced reforms to the treatment of business property and agricultural property relief from inheritance tax which are scheduled to take effect from 6 April 2026.
Currently if an asset qualifies for business property relief from inheritance tax, then 100 per cent of the value attributable to that asset will be deducted from the inheritance tax calculation. This is a highly valuable relief.
The Chancellor has announced reforms to business property relief which take effect from 6 April 2026. Under these reforms the rate of inheritance tax business property relief attributable to shares in trading companies quoted on AIM will fall from 100 per cent to 50 per cent. In relation to other types of business property, the Chancellor has proposed a £1m allowance at which business property relief will be given at the 100 per cent rate with the excess attracting business property relief at the 50 per cent rate.
Despite heavy lobbying, the Chancellor has not backtracked from her plans. A technical condoc was produced last month which includes proposals on the following points:
- First, as to how the rules will work for trusts because trusts are subject to their own special inheritance rules.
- Second, how the transitional rules will work. Unfortunately, although the new rules are slated to come into effect on 6 April 2026, gifts made on or after 30 October 2024 where the donor dies on or after 6 April 2026 are brought within the scope of the new rules.
- Third, a proposal for taxpayers to elect to pay the tax in ten yearly interest-free instalments with the tax being accelerated if the underlying property is sold.
Employment taxes, addressing non-compliance in the labour supply chain – umbrella companies: to take effect from 6 April 2026
An umbrella company is an intermediary company which would normally employ and pay temporary workers with a view to supplying them directly to end user clients or indirectly to such end user clients via employment agencies.
Under this model, the PAYE and NIC liability sits with the umbrella company. The Government has become concerned by non-compliance within the umbrella company sector with areas of concern being: (1) the operation of PAYE/ NIC; and (2) the incorrect application of holiday pay, national minimum wage and pension auto enrolment by the umbrella company sector.
The Government has announced the outcome of a consultation legislation to make companies which directly or indirectly use workers supplied by umbrella companies liable for their defaults. From 6 April 2026, if an umbrella company is used in a supply chain the obligation to account for the PAYE will be placed on the employment agency which is supplied with workers by the umbrella company or, if there is no such agency, by the end user client. We can expect draft legislation on this in due course.