In this month’s Enews, we look at HMRC’s research into the economic benefits of Making Tax Digital (MTD). There is also news on the Employment Rights Bill and the latest data on private sector activity to update you on. We also look at a change in the threshold for reporting trading income on side hustles. There is also news on the Spring Statement and the Stamp Duty deadline to update you on. We look at warnings to the Chancellor ahead of the Spring Statement. There is also a warning to check state pension entitlements and government plans to cut red tape to update you on. Finally we look at the Chancellor of Exchequer’s first Spring Statement. There is also a warning about employment law and the Finance Act 2025 to update you on.
- Financial benefit of MTD could be as high as £915 million
- Employment Rights amendments do little to address employer concerns
- Private sector activity expected to fall
- Side hustle trading threshold raised to £3,000 per year
- Chancellor has set herself a fiscal trap ahead of Spring Statement, warns IFS
- 25,000 first-time buyers set to miss stamp duty deadline
- Chancellor should consider tax rises in the Spring Statement
- Act now to boost your state pension, warn tax experts
- Chancellor unveils plan to cut red tape
- No further tax increases in Spring Statement
- Employment reforms continue to stifle business hiring intentions
- Finance Act 2025 receives Royal Assent
Financial benefit of MTD could be as high as £915 million
The financial benefits of MTD for VAT could be as high as £915 million, according to analysis carried out by HMRC.
Since April 2022 all VAT-registered businesses should be using MTD compatible software to keep digital records and submit returns.
HMRC used responses from a survey with businesses in MTD for VAT using fully functional software to estimate the average time savings businesses have made.
The results showed that, on average, businesses have saved time on their ‘business’ finances and record keeping’ compared to time spent before MTD. Across all VAT businesses using fully compatible software, the time saved is estimated to be between 26 hours and 40 hours per business per year.
HMRC said that if this was extrapolated to the population, it estimated a time saving of between 32 million hours and 49 million hours in the 2022/23 tax year across all businesses in MTD for VAT.
The financial value of this time is estimated to be between £603 million and £915 million.
HMRC said:
‘The results of our analysis provide strong evidence that Making Tax Digital is having a positive impact for businesses. The findings complement other published estimates of the administrative burden of Making Tax Digital and demonstrate a wider economic benefit, beyond any requirement to meet tax obligations.’
Internet link: GOV.UK
Employment Rights amendments do little to address employer concerns
The government’s proposed amendments to the Employment Rights Bill will do little to alleviate employer concerns, warns the Institute of Directors (IoD).
Changes to a number of proposals, including application of zero-hours contracts to agency workers and Statutory Sick Pay, have been announced.
In February, the IoD set out four key changes to the Employment Rights Bill which would significantly soften the negative impact of the reforms on hiring.
This included delaying protection against unfair dismissal so that they only come into effect after six months rather than on day one and increasing the planned reference period for the entitlement to guaranteed hours to 52 weeks.
Alexandra Hall-Chen, Principal Policy Advisor for Employment at the IoD, said:
‘While any steps to mitigate the impact of the government’s employment reforms on businesses are welcome, the changes announced today do not address the key areas of the reforms which are of particular concern to employers.
‘Substantial further amendments to the Bill will be required if it is to avoid undermining the government’s growth mission. Our own data shows that directors’ headcount expectations have dropped to lows last seen in the depths of the Covid-19 pandemic. Urgent and substantive action from government is needed to restore business confidence in hiring.’
Internet link: IoD website GOV.UK
Private sector activity expected to fall
Activity in the private sector is expected to fall for the fourth consecutive quarter, according to a Growth Indicator from the Confederation of British Industry (CBI).
Business volumes in the services sector are expected to decline to -23%, and distribution sales are anticipated to fall significantly in the three months to May.
Private sector activity fell again in the three months to February at a faster pace than the quarter to January.
However, manufacturers expect output to return to growth.
Alpesh Paleja, Deputy Chief Economist at the CBI, said:
‘There are some glimmers of hope in our latest surveys. Growth expectations have become marginally less negative, driven by a predicted return to growth in the manufacturing sector. But overall, the data still paints a picture of a tough operating environment for businesses, with consumer-facing sectors faring particularly badly.
‘We do expect some tailwinds to growth over the year ahead. Rising real incomes will hopefully give households more confidence to spend, giving some relief to the sectors suffering the most.’
Internet link: CBI website
Side hustle trading threshold raised to £3,000 per year
The reporting threshold for trading income for self assessment is being lifted from £1,000 to £3,000 gross within this parliament, according to the Treasury.
This includes people trading clothes online, dog-walking or gardening on the side, driving a taxi, or creating content online.
The Treasury says this will benefit around 300,000 taxpayers who will no longer need to file a self assessment tax return.
An estimated 90,000 of them will have no tax to pay and no reason to report their trading income to HMRC in the future at all. Others will be able to pay any tax they owe through a new simple online service.
The changes are part of the government’s Plan for Change, which it says will drive forward efficiency reform.
James Murray, Exchequer Secretary to the Treasury, said:
‘From trading old games to creating content on social media, we are changing the way HMRC works to make it easier for Brits to make the very most of their entrepreneurial spirit.
‘Taking hundreds of thousands of people out of filing tax returns means less time filling out forms and more time for them to grow their side-hustle.
‘We are going further and faster to overhaul the way HMRC works to make sure it delivers the Plan for Change that will help put more money in people’s pockets.’
Internet link: GOV.UK
Chancellor has set herself a fiscal trap ahead of Spring Statement, warns IFS
Chancellor Rachel Reeves has set herself a trap with self-imposed fiscal rules that could force her into tax hikes and deeper spending cuts as the economy deteriorates, the Institute for Fiscal Studies (IFS) has warned.
The Chancellor’s rules around borrowing have left Britain’s economic policy ‘entirely exposed’ to global changes and could force her into major tax and spending decisions at this month’s Spring Statement, previously billed as a non-event, the IFS said.
The Treasury has committed to delivering only one major fiscal event a year but the prospect of missing her own targets at the first hurdle could see Ms Reeves intervene earlier, it added.
Matthew Oulton, Research Economist at IFS, said:
‘Rachel Reeves has engineered a trap for herself, albeit in difficult circumstances. Aiming to meet inflexible, pass–fail fiscal targets by the slimmest of margins was a risky strategy from the outset.
‘It was always possible that economic conditions would deteriorate, put her on track to miss those rules, and push her into making tax and spending changes at what isn’t supposed to be a fiscal event later this month.
‘This scenario is far from guaranteed and she could still get lucky. But if not, she will have to choose between her fiscal rules and her commitment to holding only one fiscal event per year.’
Internet link: IFS website
25,000 first-time buyers set to miss stamp duty deadline
25,000 first-time buyers are predicted to miss the 31 March stamp duty deadline, according to property website Rightmove.
This is based on homes priced up to £625,000, which is the current maximum stamp duty threshold to be considered a first-time buyer.
In total, an estimated nearly 74,000 home-movers in England are currently going through the legal completion process and will just miss the deadline and complete in April.
The net effect for this group, who are set to complete just one month later, is a collective £142 million in additional stamp duty tax, compared with what they would have paid if they’d been able to complete in March. For first-time buyers, it is a total of £34 million extra in costs.
Rightmove’s Property Market Expert Colleen Babcock said:
‘We expect a rush to complete close to 31 March as first-time buyers and home-movers try to avoid paying extra in tax. Our numbers show how there is a relatively small, but disproportionately impacted group of first-time buyers who will be caught out by the changing thresholds, highlighting some disparities in the way the current system works.
‘We think it would make sense to grant a short extension to the deadline and help these movers, rather than have them face higher charges when they complete later in April.’
Internet link: Rightmove website
Chancellor should consider tax rises in the Spring Statement
Chancellor Rachel Reeves should consider increasing taxes at this month’s Spring Statement, according to the Resolution Foundation.
The Foundation noted that the UK’s economic outlook has declined markedly since the Budget last Autumn. Weaker growth and higher interest rate expectations look set to turn the UK’s projected current surplus of £10 billion into a deficit of around £5 billion.
This is likely to mean either cuts to public services, welfare, or tax rises.
The Foundation warned that any changes to Personal Independence Payments (PIP) and incapacity benefits must be handled very carefully so that the system is improved and able to support people back into work.
Instead, the think tank said, the government should raise taxes to meet the fiscal rules.
It says that extending the freeze in personal tax thresholds by a further two years to 2029-30 would raise around £8 billion. Such a measure would not affect living standards and would be paid for by wealthier families, it added.
James Smith, Research Director at the Resolution Foundation, said:
‘The Chancellor must act decisively to meet her fiscal rules.
‘Crucially, she should avoid turning the Spring Statement into a ‘sticking plaster’ Budget, with long-term thinking on welfare reform undermined by the quest for short-term savings that could cause real harm.
‘And with Britain’s fiscal pressures more likely to intensify rather than fade away, continuing to rule out tax rises is going to make future Budgets even more challenging to deliver.’
Internet link: Resolution Foundation website
Act now to boost your state pension, warn tax experts
People should check their National Insurance contributions (NICs) record to see if they can boost their state pension entitlement before 5 April 2025, warns the Low Incomes Tax Reform Group (LITRG).
For a limited time, certain people are able to make voluntary contributions to cover any gaps in their NICs record dating back as far as the 2006/07 tax year, potentially boosting entitlement to the new state pension.
This applies to people who have already retired and are claiming the new state pension, as well as those who have not yet reached state pension age.
However, the extended window to make voluntary contributions for years from 2006/07 to 2018/19 will end on 5 April 2025, following which the window will revert to the usual six tax years.
Antonia Stokes, LITRG Interim Senior Manager, said:
‘If you have gaps in your National Insurance record, it can potentially make a big difference to the amount of state pension you receive now or in the future.
‘The deadline to make voluntary contributions dating back to 2006/07 will end in a few weeks’ time, so it is time to act if you want to take advantage of this.
‘The easiest way to find out if you have a gap in your National Insurance record and how much it might cost to plug it, is to check your online tax account on GOV.UK or contact the DWP.’
Internet link: Chartered Institute of Taxation website
Chancellor unveils plan to cut red tape
Chancellor Rachel Reeves has unveiled plans to cut red tape as the government aims to kickstart economic growth.
The government says its Action Plan will save businesses across the country billions of pounds by cutting the number of regulators, streamlining their core legal duties and cracking down on complexity in the regulatory system.
It says regulators have signed up to 60 growth boosting measures, including fast-tracking new medicines to market through a new pilot to provide parallel authorisations from key healthcare regulators, so that patients can access the medicine they need quicker
Other measures will aim to boost infrastructure building by simplifying guidance to protect bat habitats and streamlining mortgage lending rules, including making it easier to re-mortgage with a new lender and reduce mortgage terms.
The UK’s business groups welcomed the announcement.
Dr. Roger Barker, Director of Policy at the Institute of Directors (IoD), said:
‘The Government’s Better Regulation Action Plan is a welcome shift to a more growth friendly approach.
‘In addition to the measures announced today, we would also like to see the government apply more rigorous and timely impact assessment procedures when considering new regulation. Non-regulatory solutions should always be considered, and the business case for new regulation should be subject to proper independent scrutiny by the Regulatory Policy Committee. There should also be a commitment to reviewing the ongoing effectiveness of existing regulation at regular intervals.’
Kate Nicholls, Chief Executive of UKHospitality, said:
‘A plan to cut red tape and reduce the burden on businesses is long overdue.
‘In sectors like hospitality, businesses have been struggling with too much cost and too many regulations for decades, and it has held back growth.’
Internet link: GOV.UK IoD website UKHospitality website
No further tax increases in Spring Statement
Chancellor Rachel Reeves announced ‘no further tax increases’ in the 2025 Spring Statement.
The Chancellor’s Autumn Budget contained a record £40 billion in tax increases. However, it did not raise personal taxes including, Income Tax, employee National Insurance contributions or VAT.
Ms Reeves had pledged one fiscal event a year and confirmed that no taxes would be raised at the Spring Statement.
Instead, the Chancellor made a number of announcements on spending and economic forecasts.
The forecast from the Office for Budget Responsibility (OBR) halved the UK’s growth in 2025 from 2% to 1%.
However, Ms Reeves pointed out that the Organisation for Economic Co-operation and Development (OECD) downgraded this year’s growth forecast for every G7 economy.
The OBR forecasts show that inflation will average 3.2% this year before falling ‘rapidly’, meeting the Bank of England’s 2% target from 2027 onwards.
Ms Reeves said that defence spending will increase to 2.5% of GDP, by reducing overseas aid.
This means an extra £2.2 billion for the Ministry of Defence in the next financial year to address ‘increasing global uncertainty’.
The government will spend a minimum of 10% of the MoD’s equipment budget on innovative technology, boosting production in places such as Derby, Glasgow and Newport.
In addition, the Chancellor said that planning reforms will put the government ‘within touching distance’ of hitting its target of 1.5 million new homes over the course of this Parliament.
Ms Reeves said that this will increase the level of real GDP by 0.2% by 2029/30, adding £6.8 billion to the economy.
The Chancellor said:
‘Our task is to secure Britain’s future in a world that is changing before our eyes. The threat facing our continent was transformed when Putin invaded Ukraine. It has since escalated further and continues to evolve rapidly.
‘At the same time, the global economy has become more uncertain, bringing insecurity at home as trading patterns become more unstable and borrowing costs rise for many major economies.’
Internet link: GOV.UK
Employment reforms continue to stifle business hiring intentions
The government’s employment reforms are causing employers to put their hiring plans on hold, according to the Institute of Directors (IoD).
The IoD noted that there was a small increase in payrolled employees in the latest Labour market data released by the Office for National Statistics (ONS).
Estimates for payrolled employees in the UK increased by 9,000 between December 2024 and January 2025, said the ONS.
However, the ONS data also showed static job vacancies and increase in the unemployment rate.
Alex Hall-Chen, Principal Policy Advisor for Employment at the Institute of Directors, said:
‘Our data shows that half of business leaders facing higher National Insurance bills plan to reduce employment in response, and that business hiring intentions over the next year remain around lows last seen at the height of the Covid-19 pandemic.
‘The government missed an opportunity at Report Stage of the Employment Rights Bill to show that it has listened to business feedback about how to avoid the reforms damaging employment prospects.
‘The government’s Better Regulation Action Plan is a welcome shift in narrative, but such commitments will ring hollow if the principles are not first applied to its plans to increase the regulation and cost associated with employing staff.’
Internet link: IoD website ONS website
Finance Act 2025 receives Royal Assent
The first Finance Act of the Labour government has gained Royal Assent and passed into law.
The Finance Act 2025 makes major changes to the tax rules for non-doms, removes the VAT exemption for private school fees, increases some rates of Capital Gains Tax (CGT) and Stamp Duty Land Tax, and extends the energy profits levy on the oil and gas sector.
The abolition of the remittance basis of taxation for non-UK domiciled individuals sees it replaced with a residence-based regime with effect from 6 April 2025. This means all longer-term UK residents will be taxed by the UK on their worldwide income and gains as they arise.
The Act removes the VAT exemption on the supply of private school fees, vocational training and board and lodgings when supplied by a private school or similar institute.
The Act increases the main rates of CGT from 10% and 20% to 18% and 24% respectively for disposals made on or after 30 October 2024.
John Barnett, Chair of the Technical Policy and Oversight Committee at the Chartered Institute of Taxation (CIOT), said:
‘Moving from domicile to residence as the basis for taxing people who are internationally mobile makes sense.
‘As well as being a major simplification, it is a fairer and more transparent basis for determining UK tax.
‘Residence is determined by criteria far more objective and certain than the subjective concept of domicile. Replacing the outdated remittance basis is also sensible and the Temporary Repatriation Facility offers a helpful transition.’
Internet link: GOV.UK CIOT website
