2025 Spring Budget Update - Everything Businesses Should Know

Spring Statement 2025: What It Means for UK Business Owners

The Spring Statement 2025, delivered by Chancellor Rachel Reeves, outlines a mix of tax changes, spending reforms, and business support measures that will affect owners, employers, and landlords across the UK.

Whether you're running a growing SME, managing a property portfolio, or overseeing financial strategy, here’s what you need to know and how to prepare.

📉 Economic Outlook: Growth Slows, Optimism Ahead

The Office for Budget Responsibility (OBR) revised the UK’s growth forecast for 2025 from 2.0% to 1.0%, reflecting economic headwinds. However, growth is expected to bounce back to 1.9% in 2026 and 1.8% in 2027.

Inflation is forecast to ease from 3.2% in 2025 to 2.0% by 2027, a promising sign for stability.

💷 National Insurance Hike for Employers

From April 6th, 2025, Employer NICs will rise from 13.8% to 15% on salaries above £5,000. The earnings threshold will be reduced from £9,100 to £5,000. However, the Employment Allowance will increase to £10,500 and will be more widely accessible.

This will increase the cost of hiring, especially for growing businesses; budget reviews and workforce planning will be essential in the coming months.

🧾 Making Tax Digital (MTD)

Despite speculation, MTD remains on track. From April 2026, all businesses and landlords earning over £30,000 must use digital software to submit quarterly returns. Now is the time to switch to MTD-compatible software and digitise your bookkeeping.

🧮 VAT, Corporation Tax and Capital Allowances

The VAT threshold has been frozen at £85,000 until at least 2027. With inflation, more small businesses will cross this line and need to register.

• Corporation tax remains at 25% for profits over £250,000; the 19% small profits rate continues for businesses under £50,000.
• Full expensing has been extended indefinitely, allowing 100% deduction on qualifying capital expenditure in year one. Great news for companies investing in equipment or infrastructure.

📈 Capital Gains Tax & Business Asset Disposal Relief

• Business Asset Disposal Relief stays intact - pay 10% CGT on qualifying sales up to £1M—good news for exit planning and succession.
• However, Capital Gains Tax for higher-rate taxpayers increases from 20% to 22% on general asset sales.

🏘️ Property & Landlord Changes

CGT on second properties rises from 26% to 28%, reducing returns for landlords. Positively, stamp duty remains unchanged for now, but a full review is expected in the Autumn Budget.

£2B in funding has been allocated to build 305,000 homes per year—positive for construction and housing-related businesses.

👩‍💻 PAYE Reform – Agencies & Contractors Must Prepare

A major overhaul is underway for businesses using contractors or agency workers:

• Stricter IR35 enforcement and PAYE rules are coming.
• Agencies will bear more liability for tax compliance within the supply chain.
• Expect greater scrutiny and expanded HMRC powers.

If you rely on temporary workers or run a recruitment agency, now’s the time to review contracts and compliance procedures.

📅 Late Filing Penalties Set to Increase

• New stricter penalties for late submission of self-assessment and VAT returns.
• Fines will now range from 3% to 10%, depending on the length of delay.
• Staying on top of deadlines is more important than ever to avoid costly hits.
  

💰 Welfare Cuts Could Affect Staff

• £5B in welfare spending cuts were announced, including a 50% reduction in the Universal Credit health element for new claimants.
• While the standard allowance is set to rise to £106 per week by 2030, businesses should be mindful that employees relying on these benefits may feel the strain.
  
  

🌍 Exports & Defence – New Business Opportunities

• Defence spending will increase to 2.5% of GDP by 2027.
• UK Export Finance has gained a £2B boost in lending capacity, opening doors for UK companies with export ambitions.
  
  

🏪 Business Rates Relief – Reduction Ahead

The current 75% rate relief for retail, hospitality, and leisure ends on March 31st, 2025, dropping to 40%, capped at £110,000 per business.

A new business rates system is expected in 2026–27, introducing two permanent lower rates to replace temporary reliefs.

Key Takeaways for Business Owners

• Review your employment and payroll plans now that Employer NICs are increasing.
• If you’re a landlord or contractor-dependent business, expect tighter margins and stricter compliance.
• Take advantage of capital allowances and export opportunities while they’re hot.
• Stay on top of digital systems to meet MTD requirements.
• Plan now for CGT increases and potential exit tax implications.

Conclusion

The Spring Statement 2025 is a mix of caution and opportunity. While tax rises and compliance tightening may put pressure on business owners, there are also big wins in areas like investment relief, export funding and housing.

As always, it pays to be proactive. Review your strategy and take action early to stay compliant, efficient and competitive.