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In the Autumn 2024 Budget we were told not to expect any tax-raising measures in the Spring Statement and we got none from the Chancellor on 26 March 2025. There remained a continued commitment to balancing the books and a renewed pledge to foster growth, but there was no rowing back on any of the tax raising measures announced in the Autumn 2024 Budget.
To be frank, although the Chancellor managed to restore the headroom in the budget to exactly the place it was in the Autumn, there is still very little room to manoeuvre and that headroom of £9.9billion is very fragile indeed. As a result, the June spending review and the Autumn 2025 Budget are going to be key. We will be waiting to see what additional spending cuts will be coming through in the spending review and can expect a summer of speculation regarding tax changes and rises.
None of the above brings relief to businesses as the period of instability and aggressive taxation continues.
To recap, there are a range of tax changes that are coming into effect in the next couple of weeks that affect businesses and business owners:
- The Employer’s NIC increase to 15% from April 2025;
- A drop in the threshold from when NICs become payable;
- An increase in the National Living Wage from April 2025;
- Business Asset Disposal Relief increasing to 14% from April 2025;
- Inheritance Tax Thresholds frozen until 2030;
- Business Property Relief (BPR) and Agricultural Property Relief (APR) significantly amended from April 2026;
- The non-dom regime abolished and replaced with a new residence scheme with effect from April 2025.
How can businesses and their owners navigate these next months and in the longer term?
Business owners and farmers
On 27 February 2025, the Government published its consultation document on the proposed reforms to APR and BPR from Inheritance Tax (IHT). The consultation provides some much-needed clarification on the new rules and will be welcomed by taxpayers looking to utilise the “window of opportunity” between now and 6 April 2026, when the new rules come into effect.
The consultation closes on 23 April 2025. The Government will then publish a response document and carry out a technical consultation on draft legislation for the changes later this year.
The proposals remain largely as anticipated and previously discussed with some additional details, clarification and case studies to illustrate how the new rules will work in practice. Most importantly, it has been confirmed that the £1 million allowance will only be reduced by property that qualifies for 100% relief (referred to as ‘qualifying agricultural and business property’). Any property which qualifies for 50% relief (which will include AIM shares from 6 April 2026) will not contribute towards the allowance.
The changes to APR and BPR are significant tax policy changes and impact vital reliefs for business owners (both farming and non-farming businesses). There is however an opportunity to consider tax planning strategies to protect business wealth and succession plans and business owners should consider taking timely advice.
Employees
Retaining and attracting talent remains crucial for any ambitious business. In circumstances where salary increases may be under pressure, the offer of an incentive to share in the growth of the company either at the point of a sale or on reaching an interim, measurable target, is a way to reward and retain staff without incurring a substantial increase in the salary bill. Properly structured though, incentive schemes can achieve so much more: they form part of the “social” pillar in the ESG metric focussing on workplace culture and business sustainability; they are also a way to engage and remain engaged with employees both in the world of flexible working and in making employees feel valued in circumstances where it may not be possible to reflect this in the pay packet.
There are a number of incentive schemes available to employers, some more attractive from a tax point of view than others. Some are more administratively intensive than others and it is worthwhile speaking to an expert to understand the suitability of the various schemes. See our useful guide for further information. It is also important to strike the balance between employees feeling rewarded and incentivised whilst possibly not giving away shares in the business immediately. Structuring the scheme so that it incentivises, retains and rewards staff while at the same time benefitting the business and helping to drive growth requires planning and forethought and a conversation with a share schemes specialist before engaging with staff is time well spent.
Opportunities
There are opportunities that have presented themselves in the Spring Statement:
- 1 in 8 young people are not in work in the UK. The welfare reforms announced recently aim to rectify this and encourage young people back into work. Does this present businesses with a talent pool as yet untapped?
- Infrastructure spending has been given a boost:
- Spending on defence has become a central pillar of the infrastructure strategy with promised spending to include high-tech weaponry, upgrading HM Naval Base in Portsmouth as well as refurbishing housing for military personnel;
- House building will increase so that 1.3 million homes will be built over the course of the parliament.
This spending will result in opportunities for tech and manufacturing businesses as well as those businesses in the supply chain.
Tax Consultations Announced
A number of tax consultations were announced in the Spring Statement, which could benefit business:
- Advance R&D tax relief clearances. The consultation is open until the 26 May 2025 and is seeking views on how error and fraud can be reduced by using the clearance system.
- Tax clearances for major infrastructure projects. The idea is to provide tax certainty on the application of the corporation tax rules for innovative and large projects.
- During April, the Government intends to hold round table discussions with stakeholders regarding Enterprise Management Incentive Schemes, Enterprise Investment Schemes and Venture Capital Trusts and the role these play in making the UK attractive to start and grow a business.
Look out for updates on these consultations and how they will affect business should their findings be implemented.
To discuss any of the issues raised in this article and how they could impact your business, please contact Cathy Bryant.
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