The Chancellor did not use her Spring Statement on 26^th March 2025 to announce any of the usual tax changes but that does not mean there is nothing to report.

MTD for ITSA

The major tax announcement is that MTD (compulsory digital record keeping and quarterly returns) for income tax is not being delayed again but expanded.

If your combined turnover from sole trader and property activities exceeds £50,000 as reported on your 2024/5 personal tax return, then you will have to keep digital records from 6^th April 2026 and make quarterly returns.  The first return will be for the period 6^th April 2026 to 5^th July 2026 due 7^th August 2026, although you can elect to prepare returns from 1^stApril to 30^th June e.g. in line with your VAT returns.

If your combined income is over £30,000. as reported on your 2025/6 personal tax returns, then you will be under MTD from 6^th April 2027.

And now if your combined income is over £20,000 on your 2026/7 return then you will be under MTD from 6^th April 2028.

Under MTD a finalisation return is also required, to include any adjustments and other income, in place of the self assessment return.  And HMRC have announced that they will not be producing software themselves for this so those subject to MTD will need to obtain their own software or employ someone who has software e.g. an accountant.

There are new exemptions from MTD ITSA including Foster Carers and non resident entertainers and sportsmen.

And MTD has been deferred for others e.g. ministers of religion.

Partnerships and Limited Companies are pushed down the line although many are already subject to MTD for VAT.

Other Income Tax Changes

Two new digital services are planned – for High Income Benefit Charge, and sole traders with turnover of between £1,000 and £3,000; to report separately and pay their taxes via PAYE rather than prepare a personal tax return.

New guidance has been published by HMRC on who needs to apply the CIS tax regime – tax on construction industry subcontractors – from 1^st March 2025

There is to be a new section on tax returns for Crypto assets.

Personal tax returns will have to report if dividends are from your own company.

Changes to Payroll from April 2025 as previously announced: –

The proposed obligation to report hours worked by employees every payday, has now been dropped.

The rate of Employers National insurance has increased from 13.8% to 15%.

The threshold for paying Employers National Insurance has decreased from £9,100 to £5,000.

There are now a lot of special national insurance categories where reduced rates and exemptions apply that may be worth exploring or checking if can/are be utilised for your staff e.g. for apprentices and young people, for pension contributions, when employing in free ports, and veterans in the first year in employment,.

The payment of tax and national insurance free benefits, or taxable benefits that pay lower national insurance than cash, are also worth exploring instead of standard pay rises or as part of employment packages e.g. mobile phones or electric cars.

The Employment Allowance has increased to £10,500.  The restrictions to claims that were based on state aid entitlement and PAYE liabilities has now been removed. But the allowance must still be allocated to just one member of a group of associated companies.  Restrictions for certain types of employees also remain e.g. the employers national insurance liability in respect of domestic employees, those caught by IR35 and those working principally for local councils or the NHS is not eligible for offset.

The employment allowance needs to be claimed annually and remember the eligibility to claim is only triggered when a staff member or second director exceeds the threshold for paying employers national insurance.  For directors that is £5,000 in the tax year – so your claim may be dismissed if you claim too early.  Note, back dated claims may be made if you had your claim dismissed for claiming too early.

HMRC funding to small employers for child related payroll payments, is increased from 103% to 108.5% e.g. for Maternity Pay.

There is new Statutory Neonatal Care pay and leave in England this year – if a child has had to go into care within 28 days of birth.

Misc Other Announcements

Penalties for late submission of MTD returns increases from 2% to 3% and 4% to 10%.

Interest on late paid tax increased to 4% above base rate i.e. 8.5% from 6^th April 2025

The official rate of interest on loans to directors etc is increased from 2.5% to 3.75% with effect from 6^th April 2025 and is now set to change quarterly instead of annually.