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Posted: Wed 26th Mar 2025
Chancellor Rachel Reeves has announced her 2025 Spring Statement. Here are the measures of relevance to small businesses in the speech and full document.
Despite appeals by some the chancellor announced no changes to the controversial employer’s National Insurance increase which will go ahead as planned on 6 April.
Other changes introduced in April include the reduction in business rates relief for retail, hospitality and leisure businesses in England. Read a guide to all the April 2025 changes here.
The Office for Budget Responsibility (OBR) has downgraded its predictions for UK economic growth in 2025 from 2% to 1%.
The group's growth forecasts for the next four years have been upgraded: 1.9% in 2026, 1.8% in 2027, 1.7% in 2028, 1.8% in 2029.
Inflation is forecast to average 3.2% in 2025, up from the previous estimate of 2.6%. It is forecast to fall to 2.1% in 2026 before reaching the government’s target of 2% in 2027.
The statement confirmed that Making Tax Digital (MTD) for income tax Self Assessment (ITSA) will be extended to sole traders and landlords with qualifying income over £20,000 from April 2028.
MTD requires taxpayers to submit quarterly tax updates to HM Revenue & Customs (HMRC) using approved software. It applies to self-employed individuals and landlords with an annual income over £50,000 from April 2026.
The government said it "will continue to explore how it can best bring the benefits of digitalisation to more of the around four million taxpayers who have income below the £20,000 threshold".
The government said it will increase late payment penalties for value added tax (VAT) taxpayers and ITSA taxpayers as they join Making Tax Digital from April 2025 onwards "to encourage taxpayers to pay on time".
The new penalties are 3% (up from 2%) of the tax owed when it overdue by 15 days, 3% (up from 2%) when overdue by 30 days, and 10% (up from 4%) when tax is overdue by 31 days or more.
The penalty rises are expected to bring in £105m in 2028-29 and £125m in 2029-30.
The chancellor unveiled what she described as “the most ambitious package of measures that we have ever seen to cut down on tax evasion”.
They include increasing the number of annual charging decisions for the most harmful fraud from 500 to 600 per year by 2029-30, launching a new scheme to reward informants of tax evasion and increasing HMRC’s resources for tackling wealthy offshore non-compliance by around 400 people.
The government has published new consultations on:
How HMRC can make better use of third-party data to increase automation and close the tax gap.
Proposals to strengthen HMRC's ability to take action against those tax advisers who facilitate non-compliance from their clients.
A package of measures to tackle those who promote marketed tax avoidance and leave their clients with unexpected tax bills.
Options to simplify and strengthen HMRC's inaccuracy and failure to notify penalties.
The government said it will hold roundtables with venture capital firms, entrepreneurs and others in April to discuss the role of tax reliefs, such as the Enterprise Management Incentives Scheme, the Enterprise Investment Scheme and the Venture Capital Trust Scheme, in supporting the growth of start-ups and businesses.
The government will publish an "interim report" this summer that sets out "a clear direction of travel for the business rates system". Further policy details will be outlined in the Autumn Budget.
In the 2024 Autumn Budget, the government said from 2026-27 it will introduce "permanently lower" business rates for retail, hospitality and leisure (RHL) properties in England, with the change "funded sustainably by introducing a higher multiplier for the most valuable properties, including distribution warehouses used by online giants".
The chancellor said the UK's defence budget will be increased by £2.2 billion in 2025-26, taking additional spending on defence to over £5 billion since the Autumn 2024 Budget.
As part of this, bureaucracy around defence procurement cut, including helping more small businesses to win contracts.
UK Defence Innovation (UKDI) will launch in July 2025 with a £400m Budget to "enable innovative technology to rapidly progress from idea to the front line to secure competitive advantage".
As announced on 14 March, the government has agreed a £2 billion increase to UK Export Finance direct lending capacity for defence exports, bringing overall lending capacity to £10 billion.
The full Spring Statement said:
"For too long innovative companies and start-ups have struggled to engage with and see a pathway to scale through a slow and confusing MOD innovation landscape, which in turn makes it hard for these companies to secure the necessary investment to grow."
The government is providing an additional £100 million to support 35,000 construction-focused skills bootcamp places, and £40 million for up to 10,000 additional places on new construction foundation apprenticeships.
The government is also launching a new teacher industry exchange scheme to attract industry experts to teach in further education, plus £100 million to establish 10 new technical excellence colleges specialised in construction in every region in England.
The Construction Industry Training Board (CITB) is doubling its New Entrants Support Team (NEST) programme to support employers, particularly small businesses, to recruit and retain apprentices.
The government has published a consultation "on widening the use of advance clearances in R&D tax credits to help reduce error and fraud, provide certainty to businesses, and improve the customer experience".
The government said it is temporarily exempting numerous goods from tariff duty "to avoid unnecessary costs for UK businesses". It includes tariffs suspended on goods including plywood and a range of food stuffs until June 2027.
Emma Jones CBE, CEO and founder of Enterprise Nation, said:
"While there was little mention of the UK's small business community in today's Spring Statement, they were referenced in the small print. It was largely in connection with tax collection and cranking up penalties for tax evasion, which in our view does not reflect the good intent of self-starters.
"Investment in getting people back into work is commendable, but we have to ask where will all these new jobs come from?
"There were positives - increases in capital spending on infrastructure and defence will provide some opportunities for small businesses in a raft of new procurement moves - these have been recently made more accessible as a result of the Procurement Act.
"This included the £400m in UK Defence Innovation fund which launches in July.
"Confirming that Making Tax Digital self-assessments will be rolled out to firms with turnover above £20,000 in 2028 is good news, but it comes with a pledge to increase VAT late payment penalties on those using the scheme from April.
"Entrepreneurs are workers as well, powering and creating 60 per cent of all employment - and for them the tone of today's Statement was downbeat. Cheerleaders required."
