Rachel Reeves delivered her first Spring Statement as Chancellor on Wednesday 26th March.
Snapshot Summary
The Autumn Budget in October saw significant tax changes that still reverberate through the business world. Despite initial concerns, the Chancellor’s Spring Statement on Wednesday was marked by forecasts and a few notable changes that business owners and individuals alike should be aware of. So, let’s really distil down the announcements and pull out the key points that impact owner-managed businesses, their owners, and their employees.
In this article, we set out the key announcements made in the Chancellor’s Spring Statement on the 26th of March.
Economy and forecastsOne of the main topics of the Spring Statement was the forecast from the Office for Budget Responsibility (OBR). The UK's growth forecast for this year was significantly reduced from 2% to just 1%. This revision was accompanied by a predicted rise in the inflation rate, which, although dropping to 2.8% in February, is expected to climb to 3.8% by July, averaging 3.2% throughout 2025.
Therefore, businesses should remain vigilant, and are advised to reassess pricing strategies and take measures to ensure that they are not losing out in real terms, also ensuring that your business is growing in real terms too. On a more positive note, two key sectors saw substantial investment: housebuilding and defence.
With new planning reforms and mandatory targets for new homes, housebuilding is expected to hit a 40-year high. Additionally, a further £2.2 billion of investment in defence was announced, with greater transparency around defence contracts providing businesses with opportunities to tender.
Tax announcementsThere were no new tax measures announced in the Chancellor’s speech, but a number of government consultations were launched in the documentation that accompanied the speech, including the following:
- R&D – looking at provision of advance assurance to companies to combat the uncertainties around this relief.
- Third party data - consulting on a common sense measure to allow data from third parties to be linked through to your tax return data held by HMRC.
- Corporate tax certainty - consulting on allowing further routes for companies to obtain advance approval on certain major projects.
- Penalties regime - consulting on changes to the penalties that apply to either failing to file or filing inaccurate returns.
- Tax avoidance - two consultations focused on increasing HMRC’s powers to tackle tax avoidance and in particular advisers who promote and facilitate such schemes.
What wasn’t announced?There was a lot of speculation in the air ahead of the Spring Statement driven by an expectation that, given poor economic performance, the Chancellor may be forced to make further tax changes fortunately these didn’t happen.
- Pension Contribution Allowance: There were no changes to the £60,000 limit for pension contributions.
- Inheritance Tax: Despite earlier speculation that the 7-year rule for IHT might be extended, no changes were made to this rule.
- ISA limits: There was no reduction made to ISA limits, which is welcome news for savers.
- No extension of tax threshold freezes on income tax/NICs: This would have extended so-called ‘fiscal drag’ by preventing thresholds from rising with inflation beyond the current limits.
Next steps for businessesLooking ahead, business owners should be prepared for potential tax changes in the upcoming Autumn Budget, with further tax increases likely. Key actions include:
- Consider opportunities available to your business to capitalise on additional funding in housebuilding and defence.
- Stay updated on the latest rules surrounding R&D tax relief, including the introduction of a prior notification requirement for claims.
- It’s important to begin succession and IHT planning now, as some strategies may require up to 7 years to be fully effective.
If you would like to discuss IHT and succession planning, please fill out the following form.
Summary
In summary, these are some of the key points to come out of the Spring Statement and our initial thoughts on the headline announcements. There’s more detail behind these announcements and other points too, which is now available in our statement summary publication which you can download here:
Tax affairs are complicated and we would always advise you to speak with your advisers before making any changes. For more information on how we can help you and your business please contact us at marketing@oldfieldadvisory.com or call 02476673160and we will be happy to advise on the best solutions for your business.
Please note: Some Statement proposals may be subject to amendment in subsequent Finance Act(s). You should contact us before taking any action as a result of the contents of this summary.
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