In this week’s Enews, we look at the Chancellor of Exchequer’s first Spring Statement. There is also a warning about employment law and the Finance Act 2025 to update you on.
News - 28 March 2025
No further tax increases in Spring Statement
Chancellor Rachel Reeves announced ‘no further tax increases’ in the 2025 Spring Statement.
The Chancellor’s Autumn Budget contained a record £40 billion in tax increases. However, it did not raise personal taxes including, Income Tax, employee National Insurance contributions or VAT.
Ms Reeves had pledged one fiscal event a year and confirmed that no taxes would be raised at the Spring Statement.
Instead, the Chancellor made a number of announcements on spending and economic forecasts.
The forecast from the Office for Budget Responsibility (OBR) halved the UK’s growth in 2025 from 2% to 1%.
However, Ms Reeves pointed out that the Organisation for Economic Co-operation and Development (OECD) downgraded this year’s growth forecast for every G7 economy.
The OBR forecasts show that inflation will average 3.2% this year before falling ‘rapidly’, meeting the Bank of England’s 2% target from 2027 onwards.
Ms Reeves said that defence spending will increase to 2.5% of GDP, by reducing overseas aid.
This means an extra £2.2 billion for the Ministry of Defence in the next financial year to address ‘increasing global uncertainty’.
The government will spend a minimum of 10% of the MoD’s equipment budget on innovative technology, boosting production in places such as Derby, Glasgow and Newport.
In addition, the Chancellor said that planning reforms will put the government 'within touching distance' of hitting its target of 1.5 million new homes over the course of this Parliament.
Ms Reeves said that this will increase the level of real GDP by 0.2% by 2029/30, adding £6.8 billion to the economy.
The Chancellor said:
‘Our task is to secure Britain’s future in a world that is changing before our eyes. The threat facing our continent was transformed when Putin invaded Ukraine. It has since escalated further and continues to evolve rapidly.
‘At the same time, the global economy has become more uncertain, bringing insecurity at home as trading patterns become more unstable and borrowing costs rise for many major economies.’
Internet link: GOV.UK
Employment reforms continue to stifle business hiring intentions
The government’s employment reforms are causing employers to put their hiring plans on hold, according to the Institute of Directors (IoD).
The IoD noted that there was a small increase in payrolled employees in the latest Labour market data released by the Office for National Statistics (ONS).
Estimates for payrolled employees in the UK increased by 9,000 between December 2024 and January 2025, said the ONS.
However, the ONS data also showed static job vacancies and increase in the unemployment rate.
Alex Hall-Chen, Principal Policy Advisor for Employment at the Institute of Directors, said:
‘Our data shows that half of business leaders facing higher National Insurance bills plan to reduce employment in response, and that business hiring intentions over the next year remain around lows last seen at the height of the Covid-19 pandemic.
‘The government missed an opportunity at Report Stage of the Employment Rights Bill to show that it has listened to business feedback about how to avoid the reforms damaging employment prospects.
‘The government’s Better Regulation Action Plan is a welcome shift in narrative, but such commitments will ring hollow if the principles are not first applied to its plans to increase the regulation and cost associated with employing staff.’
Internet link: IoD website | ONS website
Finance Act 2025 receives Royal Assent
The first Finance Act of the Labour government has gained Royal Assent and passed into law.
The Finance Act 2025 makes major changes to the tax rules for non-doms, removes the VAT exemption for private school fees, increases some rates of Capital Gains Tax (CGT) and Stamp Duty Land Tax, and extends the energy profits levy on the oil and gas sector.
The abolition of the remittance basis of taxation for non-UK domiciled individuals sees it replaced with a residence-based regime with effect from 6 April 2025. This means all longer-term UK residents will be taxed by the UK on their worldwide income and gains as they arise.
The Act removes the VAT exemption on the supply of private school fees, vocational training and board and lodgings when supplied by a private school or similar institute.
The Act increases the main rates of CGT from 10% and 20% to 18% and 24% respectively for disposals made on or after 30 October 2024.
John Barnett, Chair of the Technical Policy and Oversight Committee at the Chartered Institute of Taxation (CIOT), said:
‘Moving from domicile to residence as the basis for taxing people who are internationally mobile makes sense.
‘As well as being a major simplification, it is a fairer and more transparent basis for determining UK tax.
‘Residence is determined by criteria far more objective and certain than the subjective concept of domicile. Replacing the outdated remittance basis is also sensible and the Temporary Repatriation Facility offers a helpful transition.’
Internet link: GOV.UK | CIOT website
