We did not expect many significant tax changes or announcements in today’s Spring Statement. From that perspective, it did not disappoint.
It’s fair to say that many are still reeling from the tax changes last October particularly to the increase in inheritance tax after April 2026, bringing unspent pensions into the inheritance net from April 2027, and to increase employer’s National Insurance from next month.
What we do need is a period of stability around tax and the landscape - stability allows businesses owners to plan for the future.
The Chancellor is not happy with the growth prospects for the country. The plan is to invest heavily in the Defence and AI sector and in turn help tech businesses and start-ups in the “advanced manufacturing” sector to grow and develop.
Don’t forget that there are already existing tax efficient tools available such as the Enterprise Investment Scheme and its little brother, Seed EIS, to encourage investment and funding into those entities. R&D tax credits will further help cashflow.
Another plank of the growth plan is to improve the planning process for new housing. Mention was made of the “Grey belt” although it is not clear how this differs from Green and Brown belts.
Tax evasion and avoidance is another focus area for the Government. The tax gap is estimated to be £40bn.
However, the question remains regarding how the 500 HMRC compliance officers announced today will be recruited and trained, in addition to the 5,000 similar HMRC staff mentioned in the Autumn Budget? As this policy being fair for the country, and only add a commensurate compliance burden to taxpayers is essential. Especially given the experiences of R&D claimants in relation to recent inefficient dealings with HMRC.
The interchanging use of avoidance and evasion in the Chancellors statement was concerning, given the former is allowed (albeit potentially seen as unethical when considered aggressive), whereas the latter is illegal. As we are regularly reminded by the courts, a taxpayer is not obliged to structure their affairs in a way that means they pay the most amount of tax!
The lack of tax announcements, as expected, increases the spotlight on the changes announced in the Autumn and turns the eye to ‘what’s next’. The significant increase in employer’s NIC will happen – a huge increase in the tax burden for UK business – and the imposition of inheritance tax on business and agricultural assets for the first time in decades is here to stay.
Will we see the government break manifesto pledges in the Autumn? Expect yet more freezes in tax thresholds, which will increase the tax burden on many by the effect of fiscal drag, and perhaps some restrictions to reliefs and tax efficient wrappers such as ISAs.
One way of sticking to the manifesto promise of not increasing income tax, national insurance, corporation tax and VAT would be to introduce a new tax – the discussion about a wealth tax has attracted some attention in recent weeks and when recently asked about benefit cuts, Dianne Abbott said:
I would introduce the wealth tax. If you brought in a wealth tax of just 2% on people with assets over £10 million, that would raise £24 billion a year. That’s what I would do.
Making Tax Digital is perhaps an unknown quantity at present. We do know that landlords and sole traders with over £50,000 of income will be included from April 2026. This requires each of them to file quarterly returns, a final “digital return” as well as the usual Self-Assessment tax return. Penalties will be applied for behavior and missed deadlines. I say an unknown quantity because on the face of it, we expect significantly more work will be required to file 5 “returns” a year instead of one. Inevitably taxpayers need to consider carefully the accuracy of information provided to HMRC each quarter and aim to avoid making all accounting and “sensitive” adjustments in the final return.
MHA can help
We can help you adapt and reassess your tax and financial plans in the light of any new legislative changes, and ahead of the next full Budget in Autumn.
Contact your usual MHA adviser or your nearest office for guidance on the measures announced or to discuss other tax matters, and we will be happy to assist with any queries.
