Spring Statement 2025

Wednesday 26th March 2025
 

As I am sure you are aware, The Chancellor has delivered the Spring Statement for 2025.

Below are some of the key points from this, and other recent fiscal events, that may be of interest :

Income Tax 

No change.

Income Tax thresholds will remain frozen until April 2028.

Therefore :

20% Basic Rate from £12,570 to £50,270

40% Higher Rate from £50,270 to £125,140

45% Additional Rate from £125,140

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The Personal Tax-free Allowance remains frozen at £12,570.

Note: Personal Allowance = amount of income tax-free a person can earn if total income under £100K; after £100K the amount is decreased by £1 for every £2 of income up to £125,140. If Income is equal to or above £125,140 then the Personal Allowance is not applicable.

National Insurance

From 6th April 2025:

- Employers NI will increase by 1.2% to 15%.

- The thresholds at which Employers NI is due will be reduced from £9,100 to £5,000.

- The Employers National Insurance Allowance will increase from £5,000 to £10,500

- There are no changes to the contributions that Employees make.

Therefore :

Current Year : 2024-25 (6th April 24 to 5th April 25)

- Employee 8% NI threshold (above which NI is paid) = £12,570 

- Employee 8% NI Upper Earnings Limit (up to which the full rate NI is paid) = £50,270

- Employee 2% NI Upper Earnings over £50,270

- Employers 13.8% NI threshold (above which NI is paid by Employers) = £9,100

- Employers NI Allowance : for Employers that pay staff, where Employers NI is applicable = £5,000

- Sole Trader 6% NI threshold (above which NI is paid) increased = £12,570

- Sole Trader 6% NI Upper Earnings Limit (up to which the full rate NI is paid) = £50,270

- Sole Trader 2% NI Upper Earnings over £50,270

Next Year : 2025-26 (6th April 25 to 5th April 26)

- Employee 8% NI threshold (above which NI is paid) = £12,570 

- Employee 8% NI Upper Earnings Limit (up to which the full rate NI is paid) = £50,270

- Employee 2% NI Upper Earnings over £50,270

- Employers 15% NI threshold (above which NI is paid by Employers) = £5,000

- Employers NI Allowance : for Employers that pay staff, where Employers NI is applicable = £10,500

- Sole Trader 6% NI threshold (above which NI is paid) increased = £12,570

- Sole Trader 6% NI Upper Earnings Limit (up to which the full rate NI is paid) = £50,270

- Sole Trader 2% NI Upper Earnings over £50,270

Dividends

The 0% band was reduced  to £500 in April 2024.

There are no further changes.

Therefore :

0% Rate from £0 to £500

8.75% Basic Rate from £500 to £50,270

33.75% Higher Rate from £50,271 to £125,140

39.25% Additional Rate from £125,140

Capital Gains Tax : Property

The Capital Gains Tax thresholds and tax levels will remain the same.

Therefore :

£3,000 Tax Free Allowance

£3,000 to £50,270 = CGT Rate of 18% (20% Basic Rate taxpayers)

 Above £50,270 = CGT Rate of 24% (40% Higher Rate & 45% Additional Rate taxpayers)

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The Additional Rate of Stamp Duty on the purchase of an Additional Property to a Main Residence increased from 3% to 5% on 31st October 2024.

From 1st April the follwing changes will also occur: 

Current Year 2024-25

£0 to £250,000 = 0%

£250,001 to £925,000 = 5%

£925,001 to £1.5million = 10%

Next Year 2025-26 (from 1st April)

£0 to £125,000 = 0%

£125,001 to £250,000 = 2%

£250,001 to £925,000 = 5%

£925,001 to £1.5million = 10%

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The Additional Rate of Stamp Duty would be added to each band at 5% for Additional Properties.

Please note:

When an Additional Property (non-main home) is sold HMRC requires a CGT return and any payment of CGT due within 60 days of the completion date.

Capital Gains Tax : Non-Property

The Capital Gains Tax thresholds will increase to that of CGT on Property from 30th October 2024

Therefore :

Current Year to 29th October 2024 : 2024-25 

£3,000 Tax Free Allowance

£3,000 to £50,270 = CGT Rate of 10% (20% Basic Rate taxpayers)

 Above £50,270 = CGT Rate of 20% (40% Higher Rate & 45% Additional Rate taxpayers)

Current year from 30th October 2024 : 2024-25 

£3,000 Tax Free Allowance

£3,000 to £50,270 = CGT Rate of 18% (20% Basic Rate taxpayers)

 Above £50,270 = CGT Rate of 24% (40% Higher Rate & 45% Additional Rate taxpayers)

PAYE

Limited Company Director Salary : 

- The maximum level of Annual Salary for Limited Company Directors, before any Income Tax or Ni is due, will be reduced from £9,100 per year / £758pcm (based on the  Employers NI Threshold which has been reduced in this Budget) to £5,000 per year/ £416 pcm.

This is suboptimal as £5,000 is lower than the £6,500 'State Pension Year' from PAYE per year, so I don't advise Director's reduce their Salary to £5,000

- Instead, we will make £12,570 the new level of the maximum Salary as £12,570 is the maximum that can be taken before any Income Tax, as this is the Personal Allowance tax-free amount, saving £2,388 at 19% rate of Corporation Tax. However, NI will be due on the amount over £5,000 = £7,570 at 15% = £1,136. Corporation Tax can be saved on this of £216 at 19%. Therefore a Net Tax Saving from Director Salary of £1,468 per year.

This is down and more complex (as NI due) than the current £1,730 19% Corporation Tax saving that can be saved on a £9,100 Salary, with no Income Tax or NI due, but is still a decent tax saving per year in taxation.

Corporation Tax

 No change: 19% on Net Profits up to £50K and and then a tapered increase up to 25% for Net Profits over £250K.

The top rate of tax at 25% has been set until 2030.

VAT

The VAT Registration Threshold was increased from £85,000 to £90,000 on 1st April 2024.

Any business with Income over £90,000 in any 12 month period must be VAT Registered,

High Income Child Benefit Charge

The High Income Child Benefit Charge thresholds increased on 6th April 2024.

New thresholds :

£60,000 (below = full Child Benefit allowed) and £80,000 (greater than = 100% reclaim; under but above £60,000 = tapered reclaim). 

Therefore :

 - 1% of Child Benefit is repayable for every £200 earned over £60,000 by an individual
 - If an individual has income above £80,000 then the full amount of Child Benefit is repayable.

Making Tax Digital : Sole Traders & Property Landlords

From April 2026 Sole Traders and or Landlords with Income over £30,000  from their businesses* will need to report their Income & Expenditure digitally every quarter. 

The Quarters will be as follows:  Apr/May/Jun - Jul/Aug/Sep - Oct/Nov/Dec - Jan/Feb/Mar.

Clients affected will be written to by me about next steps nearer the time. The way we do things won't change, as I can use the usual Excel records and link to digital software. What will change is the frequency of the data needed, though if you're a VAT registered business there will be little change as quarterly returns are already being sent (we will need to change VAT dates, however, if your VAT return does not align with the quarter months stated above).

Income under £30,000 is deemed outside the scope, therefore Sole Traders and or Landlords with income under this amount will not have to file any additional information.

From 2028 (approximately) the threshold will be lowered to £20,000 by HMRC meaning that Landlords and Sole Traders with Income up to this amount needing to action quarterly Making Tax Digital submissions.

* Note: Sole Trader and Landlord income is classed as 'business income'.

National Living Wage

The National Living Wage (NLW) will increase from £11.44 per hour to £12.21 per hour from 6th April 2025.

Savings/ Interest Taxation

Bank/Savings interest are still tax-free up to £1,000 for Basic Rate Tax Payers (20% up to £50,270 of income ) and £500 for Higher Rate Payers (40% over £50,270 of income) for higher rate payers. Additional Rate Taxpayers (45%
over £125,140) must declare Bank/ Savings interest of all amounts (except ISAs) via Self Assessment as is fully taxable.

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