April 2025 Newsletter
Minimum wage rose on 1 April
Increases to the National Living Wage and National Minimum Wage took effect from 1 April.
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From April 2025, the NLW will increase by 6.7% and the NMW by as much as 18% depending on the category of the worker.
The NMW is the minimum amount per hour workers are entitled to be paid by law. Different rates apply depending on the category of the worker.
The apprenticeship rate applies to apprentices under 19 or 19 and over in the first year of apprenticeship. The NLW applies to those aged 21 and over.
Peter Bickley, Technical Manager – Employer Taxes, ICAEW, said:
'Although the rise in the minimum wage will be welcomed by many workers, it presents a further challenge for employers already facing significant changes from April 2025, not least the increase in the rate of, and secondary threshold for employers' National Insurance contributions, albeit that the bigger employment allowance should help small employers.
Employers must ensure that they continue to comply with the requirements as it is a criminal offence not to pay someone the minimum wage.'
Source: GOV.UK Website, ICAEW
No further tax increases in Spring Statement
Chancellor Rachel Reeves announced 'no further tax increases' in the 2025 Spring Statement.
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The Chancellor's Autumn Budget contained a record £40 billion in tax increases. However, it did not raise personal taxes including, Income Tax, employee National Insurance contributions or VAT.
Ms. Reeves had pledged one fiscal event a year and confirmed that no taxes would be raised at the Spring Statement.
Instead, the Chancellor made a number of announcements on spending and economic forecasts.
The forecast from the Office for Budget Responsibility (OBR) halved the UK's growth in 2025 from 2% to 1%.
However, Ms. Reeves pointed out that the Organisation for Economic Co-operation and Development (OECD) downgraded this year's growth forecast for every G7 economy.
The OBR forecasts show that inflation will average 3.2% this year before falling 'rapidly', meeting the Bank of England's 2% target from 2027 onwards.
Ms. Reeves said that defence spending will increase to 2.5% of GDP, by reducing overseas aid.
This means an extra £2.2 billion for the Ministry of Defence in the next financial year to address 'increasing global uncertainty'.
The government will spend a minimum of 10% of the MoD's equipment budget on innovative technology, boosting production in places such as Derby, Glasgow and Newport.
In addition, the Chancellor said that planning reforms will put the government 'within touching distance' of hitting its target of 1.5 million new homes over the course of this Parliament.
Ms. Reeves said that this will increase the level of real GDP by 0.2% by 2029/30, adding £6.8 billion to the economy.
The Chancellor said:
'Our task is to secure Britain's future in a world that is changing before our eyes. The threat facing our continent was transformed when Putin invaded Ukraine. It has since escalated further and continues to evolve rapidly.
At the same time, the global economy has become more uncertain, bringing insecurity at home as trading patterns become more unstable and borrowing costs rise for many major economies.'
Source: GOV.UK Website
Finance Act 2025 receives Royal Assent
The first Finance Act of the Labour government has gained Royal Assent and passed into law.
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The Finance Act 2025 makes major changes to the tax rules for non-doms, removes the VAT exemption for private school fees, increases some rates of Capital Gains Tax (CGT) and Stamp Duty Land Tax, and extends the energy profits levy on the oil and gas sector.
The abolition of the remittance basis of taxation for non-UK domiciled individuals sees it replaced with a residence-based regime with effect from 6 April 2025. This means all longer-term UK residents will be taxed by the UK on their worldwide income and gains as they arise.
The Act removes the VAT exemption on the supply of private school fees, vocational training and board and lodgings when supplied by a private school or similar institute.
The Act increases the main rates of CGT from 10% and 20% to 18% and 24% respectively for disposals made on or after 30 October 2024.
John Barnett, Chair of the Technical Policy and Oversight Committee at the Chartered Institute of Taxation (CIOT), said:
'Moving from domicile to residence as the basis for taxing people who are internationally mobile makes sense.
As well as being a major simplification, it is a fairer and more transparent basis for determining UK tax.
Residence is determined by criteria far more objective and certain than the subjective concept of domicile. Replacing the outdated remittance basis is also sensible and the Temporary Repatriation Facility offers a helpful transition.'
Source: GOV.UK Website, CIOT
Side hustle trading threshold raised to £3,000 per year
The reporting threshold for trading income for self-assessment is being lifted from £1,000 to £3,000 gross within this parliament, according to the Treasury.
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This includes people trading clothes online, dog-walking or gardening on the side, driving a taxi, or creating content online.
The Treasury says this will benefit around 300,000 taxpayers who will no longer need to file a self-assessment tax return.
An estimated 90,000 of them will have no tax to pay and no reason to report their trading income to HMRC in the future at all. Others will be able to pay any tax they owe through a new simple online service.
The changes are part of the government's Plan for Change, which it says will drive forward efficiency reform.
James Murray, Exchequer Secretary to the Treasury, said:
'From trading old games to creating content on social media, we are changing the way HMRC works to make it easier for Brits to make the very most of their entrepreneurial spirit.
Taking hundreds of thousands of people out of filing tax returns means less time filling out forms and more time for them to grow their side-hustle.
We are going further and faster to overhaul the way HMRC works to make sure it delivers the Plan for Change that will help put more money in people's pockets.'
Source: GOV.UK Website
Financial benefit of MTD could be as high as £915 million
The financial benefits of MTD for VAT could be as high as £915 million, according to analysis carried out by HMRC.
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Since April 2022 all VAT-registered businesses should be using MTD compatible software to keep digital records and submit returns.
HMRC used responses from a survey with businesses in MTD for VAT using fully functional software to estimate the average time savings businesses have made.
The results showed that, on average, businesses have saved time on their 'business' finances and record keeping' compared to time spent before MTD. Across all VAT businesses using fully compatible software, the time saved is estimated to be between 26 hours and 40 hours per business per year.
HMRC said that if this was extrapolated to the population, it estimated a time saving of between 32 million hours and 49 million hours in the 2022/23 tax year across all businesses in MTD for VAT.
The financial value of this time is estimated to be between £603 million and £915 million.
HMRC said:
'The results of our analysis provide strong evidence that Making Tax Digital is having a positive impact for businesses. The findings complement other published estimates of the administrative burden of Making Tax Digital and demonstrate a wider economic benefit, beyond any requirement to meet tax obligations.'
Source: GOV.UK Website
Chancellor unveils plan to cut red tape
Chancellor Rachel Reeves has unveiled plans to cut red tape as the government aims to kickstart economic growth.
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The government says its Action Plan will save businesses across the country billions of pounds by cutting the number of regulators, streamlining their core legal duties and cracking down on complexity in the regulatory system.
It says regulators have signed up to 60 growth boosting measures, including fast-tracking new medicines to market through a new pilot to provide parallel authorisations from key healthcare regulators, so that patients can access the medicine they need quicker
Other measures will aim to boost infrastructure building by simplifying guidance to protect bat habitats and streamlining mortgage lending rules, including making it easier to re-mortgage with a new lender and reduce mortgage terms.
The UK's business groups welcomed the announcement.
Dr. Roger Barker, Director of Policy at the Institute of Directors (IoD), said:
'The Government's Better Regulation Action Plan is a welcome shift to a more growth friendly approach.
In addition to the measures announced today, we would also like to see the government apply more rigorous and timely impact assessment procedures when considering new regulation. Non-regulatory solutions should always be considered, and the business case for new regulation should be subject to proper independent scrutiny by the Regulatory Policy Committee. There should also be a commitment to reviewing the ongoing effectiveness of existing regulation at regular intervals.'
Kate Nicholls, Chief Executive of UKHospitality, said:
'A plan to cut red tape and reduce the burden on businesses is long overdue.
In sectors like hospitality, businesses have been struggling with too much cost and too many regulations for decades, and it has held back growth.'
Source: GOV.UK Website, IoD Website, UK Hospitality Website
Employment reforms continue to stifle business hiring intentions
The government's employment reforms are causing employers to put their hiring plans on hold, according to the Institute of Directors (IoD).
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TThe IoD noted that there was a small increase in payrolled employees in the latest Labour market data released by the Office for National Statistics (ONS).
Estimates for payrolled employees in the UK increased by 9,000 between December 2024 and January 2025, said the ONS.
However, the ONS data also showed static job vacancies and increase in the unemployment rate.
Alex Hall-Chen, Principal Policy Advisor for Employment at the Institute of Directors, said:
'Our data shows that half of business leaders facing higher National Insurance bills plan to reduce employment in response, and that business hiring intentions over the next year remain around lows last seen at the height of the Covid-19 pandemic.
The government missed an opportunity at Report Stage of the Employment Rights Bill to show that it has listened to business feedback about how to avoid the reforms damaging employment prospects.
The government's Better Regulation Action Plan is a welcome shift in narrative, but such commitments will ring hollow if the principles are not first applied to its plans to increase the regulation and cost associated with employing staff.'
Source: IoD Website, ONS Website
