Spring Statement 2025: Key Changes Taking Effect From April

On Wednesday, 26th March 2025, Chancellor Rachel Reeves delivered her Spring Statement, outlining the government’s plans for the coming months.

As anticipated, the Statement contained few new measures, with the majority of significant changes having already been set out in the Autumn Budget 2024. This update primarily serves as a reminder of those previously announced policies scheduled to take effect from April 2025.

Personal Taxes

The main personal tax announcements in the Spring Statement 2025 are below.

What will the Personal Allowance be in 2025/26?

Income below the personal allowance threshold is not subject to income tax. This threshold, currently set at £12,570, has been frozen for another year and will remain at this level until April 2028. After that, it’s expected to rise in line with inflation.

Ideally, the personal allowance would increase annually to keep up with the rising cost of living. However, freezing the allowance means that more of your income becomes taxable over time—a process known as “fiscal drag.” In periods of high inflation, this can lead to higher tax bills for many people.

Since the personal allowance isn’t changing, the tax code 1257L will continue to be the most commonly used code for employees with a single job.

How much do you need to earn to lose your Personal Allowance?

For earnings above £100,000, the personal allowance is reduced by £1 for every £2 earned. This means that in the 2025/26 tax year, once earnings reach £125,140, no personal allowance will be available.

What are the Income Tax Bands for 2025/26?

The income tax thresholds for 2025/26 remain unchanged as follows:

• Basic rate band remains at £37,700.
• The higher rate band is charged on income over £50,270.
• The additional rate band is charged on income over £125,140.

What is the Optimum Directors Salary for 2025/26 tax year?

For the 2025/26 tax year, the optimal salary for most directors remains at £12,570 per year. We recommend a monthly salary of £1,047.50. Depending on your individual tax situation, any additional income can be paid either as a bonus through payroll or as dividends.

For a deeper dive into the calculations and considerations, check out our full guide to the optimal director’s salary.

What is the Marriage Allowance?

Marriage Allowance allows eligible couples to transfer £1,260 of unused personal allowance from one partner to the other, potentially reducing their overall tax bill by over £250.

You can backdate your claim by up to four tax years. For example, claims for the 2020/21 tax year must be submitted by 5 April 2025.

Think you might qualify? Read our step-by-step blog on how to apply for Marriage Allowance.

What Taxes Apply to Savings in 2025/26?

There are no changes to savings income allowances for the 2025/26 tax year.

Basic rate taxpayers (income up to £50,270) can earn up to £1,000 in savings interest tax-free.

Higher rate taxpayers (income between £50,271 and £125,140) have a reduced £500 savings allowance.

Additional rate taxpayers (income over £125,140) do not receive a savings allowance and must pay tax on all interest earned.

What Taxes Apply to Dividends in 2025/26?

Dividend tax rates and allowances remain unchanged this year:

The first £500 of dividend income is tax-free.

Basic rate taxpayers pay 8.75% on dividends above this threshold.

Higher rate taxpayers pay 33.75%.

Additional rate taxpayers pay 39.35%.

Tip: Dividends received within an ISA are completely tax-free. If you hold investments, it’s worth using your ISA allowance to reduce your tax liability.

Capital Gains Tax Rates for 2025/26

Capital Gains Tax (CGT) rates were updated in October 2024, and no further changes have been made for the 2025/26 tax year. The current rates are:

• The first £3,000 of gains are tax-free, covered by the annual exemption
• Basic rate taxpayers pay 18% on gains above the exemption
• Higher and additional rate taxpayers pay 24%

Important Note: These revised rates now apply uniformly across all types of property, including residential property. As a result, there’s no longer a distinction in CGT rates based on the asset type being sold.

What is Business Asset Disposal Relief and is it still available?

Business Asset Disposal Relief (BADR) allows individuals to pay a reduced rate of Capital Gains Tax (CGT) on qualifying gains when selling all or part of their business. This relief supports small business owners by offering a lower tax rate on gains, up to a lifetime limit of £1 million.

For assets that qualify under BADR, the tax rates are changing:

• In 2025/26, the CGT rate for BADR increases to 14% (up from 10%)
• From 2026/27, the rate will rise further to 18%

Planning ahead: Business owners considering retirement or a sale may want to bring forward their plans to take advantage of the current, lower BADR rate before the further increase takes effect.

Business & Employment Taxes

The main business and employment tax announcements in the Spring Statement 2025 are below.

What will the Corporation Tax Rate be from April 2025?

The government has confirmed that Corporation Tax rates will remain unchanged for the 2025/26 tax year. This means:

• Companies with profits over £250,000 will continue to pay 25%
• Companies with profits of £50,000 or less will pay the small profits rate of 19%
• For profits between £50,001 and £250,000, a marginal relief applies, leading to a gradually increasing effective tax rate

Want to see what this means for your business? Use our Corporation Tax Calculator below to estimate your liability.

What is Full Expensing and has Anything Changed?

Full expensing allows companies to claim 100% tax relief on qualifying capital investments, such as plant and machinery, in the year the expense is made, rather than spreading relief over several years.

For smaller limited companies, the Annual Investment Allowance (AIA) still applies, allowing a 100% deduction on qualifying assets up to £1 million per year.

In practical terms, most small businesses won’t benefit from full expensing unless they exceed this £1 million annual investment threshold.

What is the Minimum Wage from April 2025?

From April 2025, the National Living Wage will increase to £12.21 per hour. The updated National Minimum Wage rates by age group are:

• 21 and over – £12.21
• 18 to 20 – £10.00
• 16 to 17 – £7.55
• Apprentices – £7.55

Looking ahead: There are plans to align the 18–20 age group with the over-21 rate, so another notable increase for this group is expected next year.

How much will the increase in Employers National Insurance cost my business?

From April 2025, the Employer National Insurance rate will rise from 13.8% to 15.0%. In addition, the threshold at which employers begin paying NI will drop from £9,100 to £5,000.

This change may significantly affect payroll costs. To help you assess the impact, check out our blog on the Employers National Insurance Increase featuring:

• An Employer NI Calculator
• A detailed FAQ section
• Practical advice to prepare your business

How are Small Businesses Protected by the Increase in Employers NI?

The Employment Allowance offers relief for eligible businesses by reducing their Employer National Insurance liability. From April 2025, the allowance will increase by £5,500, raising the total to £10,500.

This means businesses will not pay Employer NI on the first £10,500 of their liability each tax year—providing meaningful support against rising payroll costs.

Are there any Changes to National Insurance for the Self-Employed?

For the self-employed in 2025/26:

• Class 4 NI is charged at 6% on profits between £12,570 and £50,270, and 2% on profits above £50,270
• Those earning under £6,845 can choose to pay voluntary Class 2 NI at £3.50 per week to maintain contributions towards state benefits

What’s Changing with the Tax Treatment of Double Cab Pick-Ups?

From April 2025, double cab pick-up vehicles with a payload of 1 tonne or more will be classified as cars for tax purposes.

This change affects:

• Benefit-in-kind (BIK) calculations
• Capital allowances
• Business deductions for profits

However, any qualifying vehicles purchased or leased before April 2025 can continue to follow the previous rules until April 2029.

Other Announcements

The main other announcements in the Spring Statement 2025 are below.

Making Tax Digital for Income Tax: Key Updates

The Making Tax Digital (MTD) initiative continues to expand, with more individuals and businesses being brought into the scope. The rollout schedule is as follows:

• From April 2026: Sole traders and landlords with annual income over £50,000 will be required to comply with MTD for Income Tax.
• From April 2027: The threshold lowers to include those earning over £30,000.
• From April 2028: The qualifying income threshold will reduce further to £20,000.

MTD aims to modernise the tax system by replacing annual tax returns with digital, quarterly updates. You can read the full government technical note here.

Late Payment Penalties Are Increasing

For businesses under Making Tax Digital (including both MTD for VAT and MTD for Income Tax), stricter late payment penalties will take effect from April 2025. The new penalty structure is as follows:

• 15 days late: 3% of the outstanding tax
• 30 days late: An additional 3% is charged
• From day 31 onward: A daily interest charge of 10% per annum is applied until the debt is cleared

These penalties will apply to late VAT payments starting next month. However, as MTD for Income Tax doesn’t become mandatory until April 2026, the new rules won’t apply to income tax just yet.

This change is part of HMRC’s effort to encourage timely payments and reduce the volume of overdue tax bills.

Avoiding Penalties:

VAT: Set up a Direct Debit to ensure payments are made automatically once your return is submitted.

Income Tax: Create a Personal Tax Account with HMRC to monitor any amounts due and stay ahead of deadlines.

VAT Registration and Deregistration Thresholds

There are no changes to the VAT thresholds for the 2025/26 tax year:

• Registration threshold remains at £90,000
• Deregistration threshold remains at £88,000

These thresholds determine whether a business must register or can deregister for VAT.

Furnished Holiday Lettings Regime to Be Abolished

From April 2025, the Furnished Holiday Lettings (FHL) tax regime will be abolished. After this date, FHL properties will be treated the same as other UK and overseas property rental businesses.

Key changes from 2025/26 include:

• Mortgage interest relief will be limited to the basic 20% income tax rate
• Capital allowances on new plant and machinery will no longer be available (although limited relief may apply for replacement items)
• Capital Gains Tax reliefs previously available to FHLs—such as Business Asset Disposal Relief and rollover relief—will no longer apply, as FHLs will no longer be classed as trading businesses

This change may significantly impact landlords with short-term holiday lets, so early planning is advised.

Further Information

For further information on the topics covered see HMRC Spring Statement 2025

Related Links:

• National Minimum Wage Rates from April 2025
• What is the Optimum Directors Salary?
• Employers NI Increase – Calculate how much extra your business will pay
• Tax Codes Explained – What Your Tax Code Means?
• What is the marriage allowance and can I claim £1.2k from HMRC?
• Ultimate Guide to the Construction Industry

DISCLAIMER – Please note that the content contained in this article is for general information only and is not a substitute for professional advice – read our full disclaimer