The Spring Statement 2025: Entrepreneurs and Businesses
Following the Chancellor’s Spring Statement in March, you may be concerned about how some of the tax measures or changes announced may affect you. With this in mind, in this and the next article, we have focused on the implications of the Spring Statement on entrepreneurs and business owners.
Business Tax
Corporation tax rates
The government has confirmed that the rates of Corporation Tax will remain unchanged which means that, from April 2025, the rate will stay at 25% for companies with profits over £250,000. The 19% small profits rate will be payable by companies with profits of £50,000 or less. Companies with profits between £50,001 and £250,000 will pay tax at the main rate reduced by a marginal relief, providing a gradual increase in the effective Corporation Tax rate.
The government has committed to capping the main rate of Corporation Tax at 25% for the duration of the Parliament. This is currently the lowest in the G7.
Capital allowances
The Full Expensing rules for companies allow a 100% write-off on qualifying expenditure on most plant and machinery (excluding cars) as long as it is new and unused. Similar rules apply to integral features and long-life assets at a rate of 50%. The government will explore extending Full Expensing to assets bought for leasing or hiring, when fiscal conditions allow.
Cash Basis for Accounting
The cash basis has become the default method of accounting for all businesses, including income from property, from the tax year 2024/25 and onwards. The turnover thresholds of £150,000 and £300,000 have been removed.
If you wish to use the traditional accounting method and, for example, account for prepayments and accruals, you will have to opt out of the cash basis each year. This will be done by making a declaration on your Self-Assessment tax return.
If you have more than one business you can choose which method to use for each individual business.
Trading Allowance for “Side Hustles”
There has been much publicity surrounding the ‘increase’ to the Trading Allowance. Reports suggest that this is rising from £1,000 to £3,000.
In fact, the Trading Allowance is not increasing and remains at £1,000. Any income from self-employment, or a ‘side-hustle, below this amount does not need to be reported. Under current rules if the income is above this amount it is necessary to report the income via Self-Assessment.
Under the new rules, for the reporting requirements, if the income is up to £3,000 it will still be necessary to declare the income, but HMRC will introduce a new online reporting facility for this. It will not be necessary to register for, or remain within, the Self-Assessment system if this income was the only reason for doing so.
This will no doubt make reporting easier for many, however, it is also likely to cause confusion. As yet no date has been set for this change to procedure.
In our next article in this series, we will be looking at National Insurance and National Minimum Wage requirements. As always, please contact us to discuss your circumstances with you.
These articles have been written to provide a general guide to potentially highly complex issues. Whilst great care has been taken in the production of these articles, they are intended to provide the clients and friends of Ritchie Phillips LLP with an outline of the issues individuals, families and trustees should consider and you should seek specific advice before taking or refraining from any action.
