Client news update - April 2025

Chancellor Rachel Reeves announced ‘no further tax increases’ in the 2025 Spring Statement.

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.’

Internet link: GOV.UK

Price increases are the most likely response to US tariffs by affected firms, according to a survey conducted by the British Chambers of Commerce (BCC).

The survey found that 32% of firms with trade exposure to the USA say they will increase prices in response to the tariff.

Alongside increasing prices, 15% said they would seek alternative suppliers, while 13% said they expected to absorb the costs.

Shevaun Haviland, Director General of the BCC, said:

‘This data sets out very clearly the immediate impact of US tariffs and the extent of business concern. With retaliatory moves by other countries likely to escalate, the prospect of a global trade war is increasing, alongside a widening of the economic fallout.

‘But there is strong support for the government’s approach to continue negotiation and not immediately retaliate. We believe a deal can be done as the US has already been open to talks. But firms don’t want to have all our eggs in one basket and want to see closer trading relationships with the EU and other markets.

‘They do not consider this to be an either/or scenario and we must continue to pursue a three-pronged approach of better trade relations with the US, the EU and the Indo-Pacific region.

‘This survey also gives an early warning sign on the economic impact in the UK of these tariffs, with price increases being the most likely response by firms.’

Internet link: BCC website

Pubs, clubs and restaurants will benefit from a reduction in the red tape that has stifled hospitality business, the government said.

Action includes moves to improve the application of licensing laws and strengthening businesses’ competitiveness. This will give diners, pub and partygoers more time and more choice to enjoy what the UK hospitality has to offer, the government says.

The changes include a landmark pilot that could see more alfresco dining and later opening hours in London, as the Mayor of London is granted new ‘call in’ powers to review blocked licensing applications in nightlife hotspots.

The government says that if successful, this approach could be rolled out to other mayors to work with their own local police forces across England.

Businesses have long indicated that the current licensing system lacks proportionality, consistency, and transparency – creating barriers to growth and investment for business.

Chancellor of the Exchequer, Rachel Reeves, said:

‘British businesses are the lifeblood of our communities. Our Plan for Change will make sure they have the conditions to grow – not be tied down by unnecessarily burdensome red tape.

‘We’ve heard industry concerns and we’re partnering with businesses to understand what changes need to be made, because a thriving night time economy is good for local economies, good for growth, and good for getting more money in people’s pockets.’

Internet link: GOV.UK

Reforms are needed to make the pension system easier to navigate successfully in order to help reduce the risk of a shortfall in retirement, according to the Institute for Fiscal Studies (IFS).

The think tank says that private sector employees are increasingly accumulating retirement savings in ‘defined contribution’ (DC) pensions (pension pots that do not guarantee a regular income through retirement).

Since 2015, people over 55 have been able to withdraw money from DC pensions in any way they choose.

According to the IFS, as this form of wealth becomes more important, people face too many complex and risky decisions through retirement.

This increases the risk that many exhaust their private resources and fall back purely on state pensions and benefits, especially later in retirement, the think tank added.

Bee Boileau, Research Economist at IFS, said:

‘The forthcoming Pension Schemes Bill is expected to introduce default retirement income solutions. Done well, these should improve outcomes for many, given the risks many face when drawing down pension savings through retirement at present.

‘But key questions remain – in particular, there will be some for whom a retirement income default will not be right. The government and pension providers must ensure that it is straightforward to opt out of whatever new defaults are introduced, and that as far as possible those making these decisions are sufficiently informed and helped.’

Internet link: IFS website

With big changes on the horizon for retirement income, it’s more important than ever to have the right advice. Default options won’t suit everyone, and your retirement should reflect your goals—not just a preset path. If you’re unsure about what these changes mean for you, get in touch with your usual Old Mill contact.

Increases to the National Living Wage and National Minimum Wage took effect from 1 April.

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.’

Internet link: GOV.UK ICAEW website

The independent review into the loan charge has issued a call for evidence with examples of promotional material and marketing leaflets a priority for the review team.

The review was announced by the Treasury in January and is being led by Ray McCann, a former President of the Chartered Institute of Taxation.

It is now asking people affected by the loan charge to get in touch with evidence of the schemes they were signed up to by noon on 30 May.

McCann said:

‘What the review needs most is documentary evidence, such as copies of marketing material, letters, emails and so on sent to you by the promoters of these schemes.

‘This will supplement the information the review already holds and add to the great deal of information, albeit mostly anonymous, that is in the public domain.

‘It will greatly help the review team understand why so many have become involved in these schemes, the responsibility the promoters have for bringing misery to so many and the difficulties you have had in bringing your involvement to a close.

‘The review team has suggested several questions in each section, these can be answered as they have been asked, where they are relevant, or used as a guide to the kind of information the review team needs. The review team also plan to speak to some of those involved as part of the review.’

Internet link: GOV.UK

The government’s employment reforms are causing employers to put their hiring plans on hold, according to the Institute of Directors (IoD).

The 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.’

Internet link: IoD website ONS website

The first Finance Act of the Labour government has gained Royal Assent and passed into law.

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.