Spring statement 2025
Written by Ray Coman
The Spring Statement did not deliver any significant tax changes, focusing instead on welfare reform and toughening of tax enforcement.
Self-employment late payment penalties will be harder starting from next week
New quarterly reporting obligations from April 2026
High Income Benefit Charge to be collectable through PAYE
Self-employment late payment penalties will be harder starting from next week
Making tax digital for income tax and VAT requires sole traders and landlords to keep digital record and submit a quarterly report of income and expenses to HMRC.
Currently, taxpayers are charged a penalty equal to 2% of any tax unpaid on day 16 after the filing deadline and a further 2% penalty on any amount outstanding on day 31 after the filing deadline.
From April 2025, the penalty will increase to 3% for amounts between 15 days and 29 days late and a further 3% levied on any amounts still unpaid 30 days after the due date for tax.
Any tax unpaid 31 days after the due date will be subject to a further penalty.
A further penalty will start 31 days after the due date. This is not a fixed penalty but a daily penalty. The interest rate is 4% per annum, but it will be increasing to 10% per annum from April 2025.
As a reminder, the filing and payment deadline for VAT is one calendar month and seven days after the end of the VAT period. (In practice a direct debit collects the VAT three working days after the payment deadline.)
In this example, VAT for the period ended 31 May 2025 is due by 7th July 2025. If £10,000 is still unpaid two months later by the 7th September, the penalty would be £200 levied on 23th July, a further £200 on 7th August. Between 8th August and 7 September there are 31 days. The day-rate penalty based on 10% applied to £10,000 is £85. The total penalty would therefore be £485.
Consultation into cash ISAs
The government is considering a cut to the yearly allowance for a cash ISA from £20,000 to £4,000. This is set to direct more investment into equities. This remains at a consultation phase presently.
New quarterly reporting obligations from April 2026
Most self-employed individuals and landlords will be required to comply with Making Tax Digital for Income Tax from April 2026. Any landlords or sole traders with income of £50,000 or more will be required to comply from April 2026. This threshold will decrease to £30,000 in April 2027 and again to £20,000 in April 2028. The reporting threshold is assessed on combined rental profits and self-employment profits for individuals with both activities.
Taxpayers who are required to submit residency and remittance pages of the Tax Return will not be required to join MTD for income tax until April 2027 regardless of income. This grace period will benefit mostly non-resident landlords.
High Income Benefit Charge to be collectable through PAYE
From 2025/26, it will be possible to pay High Income Benefit Charge through the PAYE code. The implication is that families will not need to register for self-assessment if Child Benefit is the only reason for needing to file a Tax Return.
How Coman&Co can help
We can assist our clients with quarterly reporting of profits. At the time of writing our fee is £40 plus VAT per quarter for assisting with the MTD requirement. Given that this would result in reduced calculation work at the year end, our MTD clients will enjoy a £40 discount on year end tax return fees. The fee includes up to 10 transactions per quarter and any further bookkeeping would be charged at 50 pence per entry.
For clients who would like to be able to track income and expenses, we can assist with software selection. Coman&Co resells QuickBooks at discounted price.
