Tim Cooper
Tim Cooper is an award-winning freelance financial journalist with 20 years’ experience
On 26 March 2025, the UK government presented its Spring Statement.
Chancellor Rachel Reeves kept her promise not to raise National Insurance, income tax or VAT rates.
A fall in UK inflation announced on the same day will also help many businesses struggling to keep costs down.
However, none of the 2024 Autumn Statement measures seen as challenging for small and medium-sized enterprises (SMEs), such as the rise in employers’ National Insurance and minimum wage increases, have changed.
And there were no mitigations or help for the worst affected sectors, such as hospitality and care.
In this article, we cover the announcements that are most likely to affect SMEs such as yours and what they mean for you.
Here’s what we cover:
Making Tax Digital for Income Tax updates
Late payment penalties increased
Tax reliefs to help growing businesses
Closing the tax gap
Business rates
Growth forecasts
Capital spending
UK Defence Innovation
Planning and Infrastructure Bill
Construction and apprenticeships
Industrial Strategy
Reactions to the 2025 Spring Statement
How to prepare your business for the “changing world”
Final thoughts
Making Tax Digital for Income Tax updates
According to the 2025 Spring Statement, sole traders and landlords who have qualifying income over £20,000 will have to follow Making Tax Digital for Income Tax from April 2028.
The legislation comes into force from April 2026 and will apply to sole traders and landlords with qualifying income over £50,000. Those earning over £30,000 will have to comply from April 2027.
Additionally, the list of exemptions has been extended to include the following:
Foreign entertainers and sportspeople who are non-UK residences (as long as they don’t have any other income within MTD requirements)
Taxpayers who have a power of attorney
Taxpayers who have a situation where HMRC “can’t provide a digital service”.
Meanwhile, a couple of deferrals were announced too:
Lloyd’s underwriters, those who receive Married Couple’s Allowance and Blind Person’s Allowance, and ministers of religion aren’t required to join MTD for Income Tax during this Parliament
Individuals who are required to submit an SA109 (residence/remittance basis pages) won’t have to follow MTD for Income Tax until April 2027.
Late payment penalties increased
The government announced an increase in late payment penalties for VAT taxpayers, and Self-Assessment income taxpayers as they join Making Tax Digital, from April 2025 onwards.
The new rates will be:
3% of the tax outstanding if overdue by 15 days
plus 3% where tax is overdue by 30 days
plus 10% a year if overdue by 31 days or more.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, says small businesses can avoid these higher fines from April by starting their returns and Self-Assessment processes early.
“Leave time to double-check the details, making sure you’ve completed every relevant section,” she says. “Set yourself plenty of reminders to pay.”
If you’re struggling with payments, you may be able to arrange to pay in instalments through HMRC’s Time to Pay scheme.
The interest payments will be cheaper than the higher fines for missing the deadline, says Susannah.
Tax reliefs to help growing businesses
The government will hold roundtables with stakeholders during spring 2025 to discuss ways to foster a positive, dynamic environment for entrepreneurs and scale-ups and enhancing tax reliefs.
This includes the role of tax reliefs such as:
Enterprise Management Incentives Schemes
Enterprise Investment Schemes
Venture Capital Trust Schemes.
Adam Owens, tax director at Xeinadin, says the UK is great at producing entrepreneurs but still struggles to help them scale and feels the Spring Statement did nothing concrete to change that.
He says: “Ministers should focus on cutting red tape, improving access to funding, and revisiting tax reliefs like Business Asset Disposal Relief to help.”
Closing the tax gap
While it didn’t announce any fiscal changes, the government did pledge to help close the “tax gap” by investing significant amounts in HMRC’s collection and recovery efforts.
Measures include:
Assigning more tax debts to private collection agencies
Recruiting 1,100 new compliance staff
Consultations on penalty reforms and addressing rogue tax advisers.
You should maintain close awareness of the tax affairs for your business, including any new rates in April 2025, to ensure you pay the right amounts on time.
Taking advice from your accountant and payroll adviser, and ensuring you have reliable up-to-date accounting systems and payroll systems, is key.
Business rates
In the 2024 Autumn Budget, the government committed to multi-year reform of the business rates system to support high streets and boost investment.
In the summer of 2025, it will publish an interim report that sets “clear direction” for the business rates system, with further policy detail to follow in the 2025 Autumn Budget.
Growth forecasts
The government delivered the welcome news that growth forecasts for 2026 and beyond have accelerated:
2026: 1.9%
2027: 1.8%
2028: 1.7%
2029: 1.8%
The less welcome news is that the UK growth forecast for 2025 has halved from 2% to 1%.
Capital spending
The government will increase capital spending by £13 billion over the Parliament to support growth, including in infrastructure, housing, and defence innovation.
This adds to the £100 billion increase in capital spending announced in autumn 2024.
UK Defence Innovation
Businesses in the defence sector are set to benefit from the government’s boost to military spending and commitment to opening procurement in the sector to more innovative firms and start-ups.
The Chancellor highlighted the UK Defence Innovation (UKDI) initiative, which was announced in February 2025 and will enable innovative technology firms and start-ups to progress projects rapidly.
UKDI will drive significantly faster procurement of innovation, foster a strong UK defence technology sector, and unlock the wider economic benefits of defence spending.
UKDI will be up and running by July 2025, with a budget of £400 million from April 2026, which is set to increase in the future.
Tina McKenzie, policy chair of the Federation of Small Businesses (FSB), says every government department should do the same as opening contracts to more smaller suppliers provides greater competition, potentially delivering savings and increasing value.
Planning and Infrastructure Bill
The Chancellor highlighted the Planning and Infrastructure Bill, which was introduced earlier in March 2025.
It will introduce a range of measures to streamline planning processes and unlock a “new scale” of housing and infrastructure by, for example, speeding planning consent and decision-making processes.
The Chancellor also pledged to invest an additional £2 billion in social and affordable housing in 2026/27.
Construction and apprenticeships
The Construction Industry Training Board (CITB) is doubling its new entrants programme to support employers, particularly small businesses, in recruiting and retaining apprentices.
CITB has also committed £32 million to top up the government’s £100 million investment to support over 40,000 construction industry placements annually.
And the government is also launching an £80 million capital fund to help employers deliver training tailored to their needs.
Industrial Strategy
The government will publish its Industrial Strategy in spring 2025.
It will set out the government and industry’s joint 10-year plan to unlock investment and accelerate expansion across eight growth-driving sectors, including advanced manufacturing, clean energy and creative industries.
However, commentators highlight that many sectors with the most employees, such as retail, healthcare and hospitality, are not included in this strategy and weren’t mentioned in the Spring Statement.
This is despite them facing significant and increasing costs in April 2025 due to employers’ National Insurance, National Minimum Wage and National Living Wage increases.
Reactions to the 2025 Spring Statement
Glenn Collins, head of technical and strategic engagement at the Association of Chartered Certified Accountants (ACCA), highlights that small business sentiment is at its lowest ebb, except during the pandemic. This Spring Statement was a missed opportunity to address that.
“We hoped for more to build confidence in SMEs,” he says. “Many face increased costs over the next few months and are unsure whether to invest in training, infrastructure or research and development [R&D].
“I would have loved to see more strategies to support industry, trade and small businesses. Instead, they will have to wait until June at the earliest for any more announcements that could help build their confidence.”
Derry Crowley, CEO of accountancy and business advisory firm Xeinadin, says: “This Spring Statement demonstrates consistency, which is good for business.
“The government is sticking to its principle of having only one big fiscal event a year, giving businesses more time to prepare and adjust to changes.”
Alex O’Malley, managing director of Love Finance, says: “The statement outlines ambitious plans to fuel the UK’s long-term growth, including reforms to planning and an uptick in defence spending.
“While the Office for Budget Responsibility predicted these reforms could impact GDP by 2029, SMEs are still grappling with immediate challenges.
“Reforms around housing and public sector efficiency are a step in the right direction, but we need to address small business access to finance and their struggle with ongoing inflation.”
How to prepare your business for the “changing world”
The Chancellor frequently mentioned the “changing world” we’re now in, and it’s crucial for you to understand the wider context of her statement.
The government has left relatively small fiscal headroom and many commentators say this buffer could disappear quickly if the expected wave of US tariffs in 2025 negatively impact global trade.
However, such uncertainty breeds opportunity, and your business should be ready for any chances that pop up.
Glenn Collins at ACCA says: “Make sure you have good business fundamentals, such as a strong business plan, and you are equipped to take advantage of any opportunities in your sector.
“Examples might include currency volatility or tariffs causing companies to diversify or onshore supply chains.
“Make sure your supply lines are resilient. If other company’s chains suffer, that could give you a competitive advantage.
“Or some businesses may need help with a different management or structure, for example. Could you develop product or service lines to help them?”
Final thoughts
While there weren’t any tax or payroll measures announced in the 2025 Spring Statement that require immediate action for your business, there’s still plenty to be aware of.
Your business will need to be at its most dynamic and agile over the next few months. Talented employees primed to act, with advanced technology such as AI and enterprise intelligence at their fingertips, should help you meet the many challenges and gain a competitive advantage where possible.
Glenn adds: “Ensure you have the right cash, finance and people so you can make quick decisions.
“Also keep your business systems up to date so they are not burdens and you can call on information to make fast effective decisions.”
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