What to expect from the spring statement?

“When a new government takes office, they often make difficult financial announcements early on, and Labour’s October 2024 budget set the tone for higher taxation. However, global uncertainty since then, including the change of US president and the impact of tariffs being levied, together with ongoing conflicts in Ukraine may force further announcements on tax, due to the focus on higher spending on defence, amongst other things”

Hidden tax through fiscal drag

“One of the most pressing impacts for the normal working person is fiscal drag—the freezing of tax thresholds while wages rise. Income tax and National Insurance thresholds are locked until at least 2027-28, meaning more people will be pulled into higher tax brackets without an explicit tax rate increase being announced. This particularly affects middle earners, who are seeing a greater proportion of their income taxed at higher rates without necessarily feeling like they’re earning more.

“Whilst the government initially pledged not to raise taxes on the ‘working person,’ this promise may not be as clear-cut as it seems. The definition of a ‘working person’ is broad, and the government may look to find alternative ways to increase revenue by targeting specific groups through new levies or indirect taxation.”

Inheritance tax under the spotlight

“The government has faced backlash over planned changes to Inheritance Tax (IHT) for farmers and the inclusion of pensions into IHT. There is speculation that, in response to criticism, the government may dilute their IHT reforms by rebasing the tax-free threshold or extending reliefs for business and agricultural assets to mitigate some of the impact.”

What do businesses need from this statement?

“For businesses, the main concern is uncertainty. Many of our clients are trying to plan for the next five years, but with continuous changes, it’s difficult to put long-term strategies in place.

“Businesses are already feeling the impact of recent tax and employment law changes, including National Insurance increases and the upcoming rise in the National Minimum Wage in April. If the government wants to achieve economic growth, they need businesses on their side. Additional employment rights legislation and higher costs could put further pressure on companies already grappling with inflation and recruitment challenges.

“For self-employed people and buy to let landlords, the government’s ‘Making Tax Digital’ initiative is set to roll out in 2026, which will mean that instead of just the annual tax return submission, individuals will be required to submit tax updates quarterly, essentially giving the government faster access to tax information and revenue”.

“For both businesses and individuals, tax planning is becoming more difficult. People naturally want to find ways to save tax, but with constant shifts in policy, it’s becoming increasingly complex. While we, as advisors, help our clients to mitigate these risks, there needs to be more clarity and support from the government, albeit this is hard to achieve in such uncertain times globally, both politically and economically”.

“While broad tax cuts may not be on the agenda, the government is looking to increase business growth and investment by offering targeted incentives. Businesses investing in new machinery, operating in the green energy and sustainability sectors or undertaking research and development or could benefit from beneficial tax reliefs, reducing the rate payable from the headline rate”.

“As the spring statement announcement approaches, businesses and individuals should prepare for further tax tweaks that could impact long-term planning. The key message for taxpayers and businesses is to stay informed and seek professional advice to navigate these changes effectively.”

To find out more about UHY and to see advice, visit www.uhy-uk.com