Craig Hughes, Head of Private Client Tax Services, comments:

“As we approach the Spring Budget, and when trying to predict possible changes that may appear, we should recognise that whatever the plan was for October 2024, it has not worked (nor can I see how it ever was going to work!). The UK economy is stalling; low growth, a weakening labour market (an obvious consequence of the changes to employers NIC and the extra financial burden of employing people), and inflation not coming down as quickly as hoped.    Alongside this, the financial needs of the UK government have not changed, and if anything, have worsened as the need for an increased military spending can no longer be ignored.  

With the above in mind, the Government need to find policies which encourage growth, encourage corporate spending (on innovation and people) and encourage individuals to remain in the UK and keep their roots in the UK (personally, investments and their businesses).  Equally, the Government need to do this in a way which increases the tax receipts for the treasury. A rather impossible task I would suggest. There is some sense in loosening the tax changes on individuals and more importantly, UK businesses; by encouraging growth, and then the tax will come. However, this is not the philosophy adopted by the Labour Party to date so my predictions below (while hoping for a loosening in some areas) are also tinged with tightening in other areas.”

Inheritance Tax (IHT)

With significant changes announced in October, I do not see there being any significant changes in IHT but some minor tweaks which could have a significant impact for individuals undertaking IHT planning.   For this reason, our suggestion would be for people to undertake IHT planning without delay while the IHT landscape is known.

Taxation of Rental Income

With ongoing inflation and high property prices, there could be increased scrutiny and potential changes to the taxation of rental income or capital gains from the sale of property, particularly in the context of buy-to-let property owners and the treatment of private landlords.

standby for more Spring Statement predictions!

Personal Income Tax

• Income Tax Bands and Rates: There has been speculation about adjustments to income tax thresholds. Currently, the UK has a Personal Allowance of £12,570, and the higher rate of 40% kicks in at £50,270. There have been discussions about whether these thresholds will be unfrozen or lowered.   The current freeze on both ends from April 2028 but I wonder whether the thawing process will be implemented earlier perhaps with the 40% income band being reduced to bring more people into 40% tax, plus an equivalent reduction in the 45% band.   Where income is controllable, people may wish to advance dividend and bonus payments so that they fall within 2024/25 and perhaps in advance of the Spring Budget itself.

• Tax Brackets: If we are being ‘radical’ in our approach, and contrary to the approach of simplification, could a new rate of 30% be introduced to sit in between the 20% and 40% bands?

National Insurance Contributions

The NIC changes announced in October were out of desperation and need, given the manifesto left little room to manoeuvre.   While the clear aim was to avoid policies which penalised the workers, the hike in employer NIC has had a significant impact on employers and, as a natural onward consequence, on employees and the hiring of new employees (which has since stalled).   While there will be a cost impact of doing so, we are hopeful that the Spring Budget will see some form of revisiting this policy, potentially reducing rates or adjusting the thresholds for various income bands.

Capital Gains Tax (CGT)

 After the CGT rate changes announced in October – there is little chance, I would suggest, for CGT rates to increase further.    I can, however, see that later in this term CGT rates increasing but to do this again after October seems unlikely.

Tax Treatment of Trusts

The tax treatment of trusts remains a key area of interest. There could be further changes to how income and capital gains are taxed within trusts, especially regarding the ten-year charge and the treatment of discretionary trusts.   The consultation needs to be fully finalised first such that, in the short term, I do not anticipate any changes in Trust tax law.

HMRC focus on closing the tax gap

Matt Watkins, Tax Disputes & Disclosures Director, comments:

“In the Autumn Budget 2024 we got a sense of how the Government were intending to close the tax gap, defined as the difference between the amount that in theory should be paid to HMRC and what is actually paid. Every Government quite rightly tries to bring the tax gap down as far as possible. At the Spring Budget we are unlikely to hear anything particularly new or groundbreaking to achieve this aim, but more likely a progress report on what impact the promised increased investment in IT, debt collection and HMRC recruitment is having.

Alternatively it may be that some specific actions are announced in response to the criticism HMRC received from the Committee of Public Accounts (PAC) report, released in January 2025. The PAC pushed for HMRC to work closer with Companies House and the Insolvency Service to tackle evasion being facilitated through fraudulent companies, so we may hear that this will be an area of focus for HMRC over the short and medium term. The PAC also directed HMRC to produce a strategy setting out exactly how they intended to tackle tax evasion, so it may be that the Government announce further consultations in this area if HMRC feel they need some new ideas. If the Government choose to take a more assertive approach, they could adopt the well tested ‘carrot and stick’ strategy to ‘crack down’ on tax evasion. The ‘carrot’ being promoting the advantages of settling tax evasion cases through Code of Practice 9, with the ‘stick’ being an increase in the number of criminal investigations they open. Therefore we could see an increase in publicity from HMRC to encourage more taxpayers to come forward to bring their affairs up-to-date and possibly a return to the ‘HMRC are watching’, big brother style approach, to encourage taxpayers to regularise their tax affairs before the brown envelope from HMRC arrives.“

The spring statement has to focus on what can be done to stimulate innovation and one of the keys to this for the financial services sector is regulatory reform, this might be further staffing the FCA to allow them the scope to deal more efficiently with applications and expanding the regulatory sandboxes to allow new ideas to be tested out for longer periods before full authorisation is required.

The Treasury has committed to one major fiscal event per year. With the significant changes announced in the Autumn Budget 2024, it should be unlikely that there are any further major changes on the horizon to be announced in the spring statement on 26 March 2025. That said, the Government has not ruled out any new announcements, so we may still see new tax rules being implemented this year.

The UK property and construction sector is under pressure from affordability issues, rising costs, and labour shortages. The Government should extend SDLT relief for first-time buyers, scrap the NI increase to control construction costs, and revise visa rules to retain international architects. Additionally, boosting workforce training in skilled trades and ensuring transparency in infrastructure projects will help maintain sector growth. With inflation driving up building costs and house prices, strategic interventions are needed to support homebuyers, developers, and construction firms while maintaining public confidence in infrastructure investment.

The Chancellor’s recently outlined a vision for faster growth fuelled by increased investment. Retailers support the government’s emphasis on growth, especially its call for faster planning decisions and the establishment of Skills England to enhance skills and training. However, retail investment is being burdened by £7bn in new costs this year, stemming from higher employer NICs, an increased National Living Wage, and the new packaging levy. These additional expenses are hindering new investments in stores and jobs, and pushing retailers to raise prices.

The Chancellor has committed to one major fiscal event a year in order to give families and businesses stability and certainty on upcoming tax and spending changes and, in turn, to support the government’s growth mission. It does, however, provide the opportunity to fine tune some of the more controversial announcements that were made in her Autumn Budget, including potential further tax changes. 

Chancellor Rachel Reeves is set to deliver the Spring Statement on the 26^th of March. Early signals suggest that spending cuts could be on the horizon, but with growth remaining a top priority for the government, we’ve put together a wish list of moves that could help drive growth in the H&L sector:

The UK manufacturing sector faces key challenges ahead of the Spring Statement, from tax changes impacting SMEs to skills shortages and global competitiveness. Industry leaders seek government support for investment in innovation, AI, defence procurement, and maintaining strong UK-US trade relations to drive future growth.