Spring Statement for small businesses: growth forecast, MTD updates and tax fines

Emily Coltman FCA
Chief Accountant

Chancellor Rachel Reeves outlined her plans to navigate the economy through an “uncertain world” in a Spring Statement delivered against the backdrop of a fall in the UK’s forecasted growth for 2025. 

As was widely predicted, the Chancellor today (26th March) confirmed wider cuts to welfare and billions of extra pounds in defence spending as the Office for Budget Responsibility cut the UK’s forecasted growth for 2025 from 2% to 1%.   

But the Spring Statement also contained some important updates that affect small businesses, while confirming there will be no change to the rise in National Insurance for employers coming in April.   

Here are the key changes for business owners and landlords included in the Chancellor’s statement and detailed in the HM Treasury reports.

Changes and updates for Making Tax Digital for Income Tax

Though not mentioned in Rachel Reeves’ speech to Parliament, the Spring Statement policy paper (alongside a newly published technical note) includes important updates about the roll out of Making Tax Digital for Income Tax (MTD for Income Tax).

Further timings confirmed

The Spring Statement announced that MTD for Income Tax will apply to most self-employed individuals and landlords with qualifying income over £20,000 from April 2028. This clarifies the announcement in the 2024 Autumn Budget, which said only that these taxpayers would be included “by the end of this Parliament” (which could potentially run until summer 2029). 

The timings will not change for self-employed individuals and landlords with income over £50,000 - who will be included from April 2026 - nor for those with incomes of over £30,000, who will have to be MTD for Income Tax-compliant by April 2027. 

No dates for partnerships or Corporation Tax (yet)

While we now know more about timings for self-employed individuals and landlords, the Spring Statement did not bring any more information about when partnerships will come into MTD for Income Tax. Nor was there any mention of MTD for Corporation Tax, which would bring limited companies into MTD for direct tax.

New exemptions

The government says there are “some taxpayer groups who will face disproportionate barriers to operating MTD and should be exempt”. These groups will not be required to use MTD for Income Tax (subject to notifying and satisfying HMRC that they are exempt):  

• taxpayers 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
• taxpayers for whom HMRC cannot provide a digital service

In addition, some small groups have been deemed too costly and complex to be included in MTD for Income Tax in the near term. These groups will be exempt for the duration of this parliament:  

• ministers of religion  
• Lloyd’s Underwriters  
• recipients of the Blind Persons’ Allowance  
• recipients of the Married Couples’ Allowance [Note: this benefit - which requires one spouse to have been born before 6th April 1935 - should not be confused with Marriage Allowance, for which there is no exemption.]

Final tax returns must be filed through accounting software

In a move designed to improve and simplify end-of-year processes, the government announced MTD users will have to submit their final tax return - also known as the Final Declaration - through MTD-compatible accounting software (like FreeAgent). 

This replaces the previous plan, which would have permitted users to submit quarterly updates through their accounting software, then use HMRC’s online filing service to submit their final tax return.  

The government will adopt this change and introduce legislation ahead of April 2026. 

Increased penalties for late Making Tax Digital (MTD) payments

As part of the Chancellor’s commitment to “closing the tax gap”, late payment penalties for those using MTD for VAT and MTD for Income Tax will increase from April 2025. This is in addition to the Autumn Budget announcement around interest rate increases for late payers (covered in our new tax year blog). 

Currently, if VAT-registered businesses are late paying their Making Tax Digital for VAT bills, they must pay a percentage of the amount outstanding as a penalty: 

• 0-14 days late: no penalty
• 15-29 days: 2% of the amount outstanding at day 15
• 30+ days: 2% of the amount outstanding at day 15 + 2% of the amount outstanding at day 30

The new rates from 6th April 2025 will be:

• 0-14 days late: no penalty
• 15-29 days: 3% of the amount outstanding at day 15
• 30+ days: 3% of the amount outstanding at day 15 + 3% of the amount outstanding at day 30

There will also be a penalty of 10% of the amount outstanding added per annum, on top of the penalties listed above.

These new rates will also apply to anyone submitting MTD for Income Tax submissions - which will be mandatory for most self-employed individuals and landlords with an income over £50,000 from April 2026. 

No change to employers’ National Insurance plans

Any small business owners hoping the government would backtrack on the changes to National Insurance (NI) rates and Employment Allowance announced in the Autumn Budget will be disappointed as the Chancellor steered away from any new tax or NI announcements. 

This means that from 6th April, employers will pay NI on workers’ earnings over £5,000 (subject to the Employment Allowance) and the employers’ NI rate is rising from 13.8% to 15%. The Employment Allowance will increase to £10,500 and the upper eligibility threshold of £100,000 will be scrapped as planned. Changes to the National Living Wage and National Minimum Wage will also go ahead as planned in April. Read our blog on the updates being introduced in the new tax year for more on these changes. 

Extra funding and powers for HMRC to fight tax evasion 

The government announced extra investment and powers for HMRC to help reduce unpaid taxes and prosecute more tax fraudsters. 

The investment will increase HMRC’s debt management capacity, move towards more automated debt recovery, and fund a new pilot scheme to collect more aged debts. An extra 500 HMRC compliance staff and 600 HMRC debt management staff are to be recruited and £87 million is being invested in HMRC partnerships with private debt collection agencies.

A new HMRC reward scheme for informants will be launched later this year which will target non-compliance, including in large corporates and offshore and avoidance schemes. It will follow US and Canadian models that reward informants with compensation linked to a percentage of any tax taken as a result of their actions. 

HMRC, Companies House and the Insolvency Service will work together on a joint plan to tackle those using “contrived insolvencies” to evade tax and write off debts owed to others - so-called ‘phoenix companies’. This will involve increasing the use of upfront payment demands, making more directors personally liable for company taxes, and increasing the number of enforcement sanctions.

High Income Child Benefit Charge reporting changes

Many employed parents and carers will have a simpler way to report their Child Benefit and pay the High Income Child Benefit Charge (HICBC). 

HICBC is paid by people who earn over the individual income threshold of £60,000 and who get Child Benefit either through themselves, their partner, or someone else who contributes to a child that is living with them. From summer 2025, employees will be able to report Child Benefit directly to HMRC and pay the charge through PAYE, rather than needing to register for Self Assessment to pay it.

To learn more about all the changes announced in the Budget, you can read the full report on the government’s website. Or read all about the changes coming in April for small businesses and landlords in our New tax year, new rules blog.