The Spring Statement 2025: Tax Administration
In this final article in our Spring Statement series, we take a look at some of the changes to tax administration and how these changes may affect you or your business.
Making Tax Digital (MTD) for Income Tax
The rollout of MTD for Income Tax will be expanded to include a wider range of small businesses and will operate as follows:
- It will start from April 2026 for sole traders and landlords with qualifying incomes over £50,000
- It will extend to those with qualifying incomes over £30,000 in April 2027
- It will extend again to those with qualifying incomes over £20,000 from April 2028.
The decision to reduce the threshold to £20,000 will ensure that 900,000 sole traders and landlords, who will now join MTD for Income Tax from April 2028, have the time they need to prepare for the changes.
As part of the ongoing rollout, the government will continue to explore how it can best bring the benefits of digitalisation to a greater proportion of the four million sole traders and landlords who have income below the £20,000 threshold.
In addition, the following groups will not be required to use MTD for Income Tax:
- customers who have a Power of Attorney
- non-UK resident foreign entertainers and sportspeople who have no other income sources that count as qualifying income for MTD for Income Tax
- customers for whom HMRC cannot provide a digital service.
Also, the following groups will not be required to join MTD for Income Tax over the course of this Parliament:
- Ministers of Religion
- Lloyd’s Underwriters
- recipients of the Married Couples’ Allowance and Blind Persons’ Allowance.
Finally, the government will increase late payment penalties for VAT taxpayers and Income Tax Self-Assessment taxpayers as they join MTD for Income Tax from April 2025. The new rates will be 3% of the tax outstanding where tax is overdue by 15 days, plus 3% where tax is overdue by 30 days, plus 10% per annum where tax is overdue by 31 days or more.
We will be providing further information about MTD in due course.
Consultations
There were a number of tax-related consultations announced in the Spring Statement, including:
- Clearances for the Research and Development tax reliefs, with the aims of reducing error and fraud, increasing certainty for customers and improving customer experience
- Modernising how HMRC acquires and uses third-party data to make it easier for taxpayers to get tax right first time
- Options to improve the financial penalties that apply when inaccuracies are found in returns and documents submitted to HMRC and where taxpayers do not meet their obligations to notify HMRC of circumstances that affect their tax liability
- Options to enhance HMRC’s powers and sanctions to take swifter and stronger action against tax advisers who facilitate non-compliance.
HMRC interest increase
The increase in late payment interest rates charged by HMRC on unpaid tax of 1.5% takes the rate from 7.5% to 9.0%.
As always, please contact us to discuss your circumstances with you and any of the issues raised in this series of articles.
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.
