With Labour committed to keeping their main tax announcements in their Autumn Budgets, commentators are not expecting any major tax changes in the upcoming Spring Statement. As the UK’s tax burden is already at a historic high, it is more likely that spending cuts and reform to public finances will take centre stage.
However, there are still some key areas that businesses and individuals should keep an eye on. Our tax experts have identified potential areas for change and their impact on businesses and individuals.
Wealth transfer via gifts
Many individuals are transferring wealth by gifting assets to the next generation with a view to reducing their Inheritance Tax exposure. In some cases, these transfers have been accelerated due to the changes announced by the Chancellor in her last Budget. There is speculation that Rachel Reeves might introduce a lifetime gifting allowance, which could require upfront taxation on gifts exceeding £325,000.
This would reintroduce a system that was in place many years ago, where large gifts above a certain threshold were taxed immediately. Under the current seven-year rule, gifts can be made Inheritance Tax free as long as the donor survives for seven years.
If you are considering a substantial lump sum gift to family members, it may be prudent to act before the Spring Statement, as these changes could take effect immediately.
Non-Domiciled Tax Regime
Despite the Chancellor indicating at Davos that there could be some softening of the non-dom reforms (which are set to apply from 6 April onwards), further changes appear to be unlikely. The Chancellor has stated that inward investment to the UK is a central pillar of the Government’s growth strategy, so additional reform cannot be ruled out in the future to encourage use of the Transitional Repatriation Facility. We will be monitoring the Budget for any last-minute developments.
Pension Reforms 2027
Significant uncertainty remains around the planned pension changes in 2027. Currently, there is little clarity on what these changes will entail, making it difficult for individuals to understand how their pensions will be impacted with the re-introduction of a charge to Inheritance Tax on the death of the beneficiary of the pension scheme. There is hope that the Spring Statement might provide more clarity to help individuals prepare ahead of official changes.
VAT
With the government seeking additional revenue, closing the VAT gap, which is now estimated at £9.5 billion for 2023/24, up from £8.1 billion in 2022/23, is likely to remain a priority.
It’s unlikely that much will be announced that hasn’t been already. We expect increased enforcement activity on businesses with VAT debts. We’re seeing greater use of the Insolvency process and Notices of Requirement to Provide Security and with the hiring of 5,000 additional HMRC officers, announced in August 2024, we will likely see a more aggressive and litigious HMRC.
The temporary 5p reduction in fuel duty may also remain in place to ease the burden on businesses, especially given the backdrop of the upcoming National Insurance increases and rising inflation.
Looking ahead, we would like to see various VAT reforms, such as:
While the Spring Statement may not bring sweeping changes, it could hint at – or even set the stage – for more significant changes to the UK’s tax rules later in the year. With speculation around potential tweaks to key policies, businesses and individuals should stay prepared for any shifts that may impact their affairs.
Our team at HW Fisher will be monitoring developments closely, providing expert analysis to help navigate any changes.
If you have any questions or concerns about how the Spring Statement might affect you, get in touch with our experts for tailored advice.
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