Author: Glenn

Making Tax Digital for Income Tax (MTD for IT) will become mandatory in phases from April 2026. If you’re self-employed or a landlord earning over £50,000, get ready for quarterly updates, digital record keeping, and a new penalty system.

Initially, MTD for IT will apply to businesses, self-employed individuals, and landlords with an annual income exceeding £50,000. From 6 April 2027, the rules will extend to those with an income between £30,000 and £50,000. A new system of penalties for late filing and late payment of tax will also be introduced.

In the Spring Statement 2025, the government confirmed that MTD for IT will apply to sole traders and landlords with income over £20,000 starting in April 2028. The government will also explore how to treat those with income below the £20,000 threshold.

Starting in April 2025, HMRC will begin writing to taxpayers whose 2023-24 self-assessment returns show that their total income from self-employment and property is approaching or exceeds £50,000. These letters will notify them of their obligation to use MTD for IT starting in April 2026.

Although MTD for IT becomes mandatory in 2026, you can opt to sign up voluntarily before then. This allows you to help HMRC test and refine the system while also familiarising yourself with the new rules. While signing up is currently voluntary, there are specific eligibility requirements, and not all taxpayers will qualify. If you are eligible, you can sign up on GOV.UK.

If you volunteer to participate in testing the MTD for IT service, the new penalties for late submissions and late payments will apply. This will replace the existing penalties for the relevant tax years. No penalties will apply for the quarterly updates for volunteers in 2024-25 or 2025-26.

Spring Statement 2025: Key Tax Measures and Modernisation Initiatives

Chancellor Rachel Reeves’ Spring Statement 2025, delivered on 26 March, arrived at a critical point for the UK economy. With the Office for Budget Responsibility downgrading growth forecasts to just over 1% for the year and borrowing costs climbing, the tone of the statement was more pragmatic than bold. The Chancellor focused on reforming the tax system, encouraging economic resilience, and driving public sector efficiency.

What she did not deliver is an easing of the Employers’ NIC and other business tax increases timed to commence April 2025.

Several key announcements were of direct interest to taxpayers, business owners, and advisers – especially those connected to tax compliance, digitalisation, and HMRC powers. Below is a summary and commentary on the most relevant developments.

Making Tax Digital: A cautious but firm step forward

The most significant administrative update was the proposed, phased extension of Making Tax Digital for Income Tax (MTD for IT). The new timeline will see sole-traders and landlords with income over £20,000 required to join from April 2028. Those earning less than £20,000 remain outside of the scope for now, though the door remains open for further inclusion after evaluation.

Key points:

• Quarterly digital updates will be required
• Use of MTD-compatible software is mandatory
• HMRC is promising better support, including for digitally excluded taxpayers

This longer runway reflects lessons from the somewhat bumpy rollout for VAT. Reeves has chosen to pair technology adoption with a broader simplification agenda, aiming to reduce burdens on small businesses. However, concerns remain that HMRC's own systems are not yet robust enough to support a seamless experience.

Comment: While the delay gives agents and taxpayers more time to prepare, the widening of the scope will demand strong communication and software readiness. The risk is that smaller landlords and sole traders will be hit by costs and confusion unless HMRC delivers better outreach and support tools than previously managed.

Closing in on promoters of tax avoidance

The government has published a consultation titled “Closing in on Promoters of Marketed Tax Avoidance,” targeting schemes that promise to artificially reduce tax liabilities. This builds on previous reforms but includes:

• New penalty models for scheme promoters
• The introduction of strict liability criminal offences for serial promoters
• Enhanced HMRC powers to publish names of enablers earlier in the process
• Measures to disrupt schemes at the planning stage, not just after the fact

This is part of a broader policy trend that shows HMRC is shifting focus from reactive enforcement to proactive disruption. The goal is to make the UK an increasingly hostile environment for tax avoidance outfits operating on the margins of legality.

Comment: There's a strong political consensus behind these moves. But care will need to be taken to avoid unintended effects on legitimate tax planning and professional advisory services. Many practitioners will welcome stronger action against cowboys but will be watching closely to ensure that standard commercial tax advice isn’t caught up in the dragnet.

Behavioural penalties reform

HMRC has launched a consultation on overhauling its behavioural penalties regime, which applies to errors in tax returns or failures to notify chargeability. The key aims are to:

• Simplify the rules, which are widely considered complex and hard to apply consistently
• Introduce clearer thresholds for when penalties apply
• Make penalties more proportionate and responsive to actual behaviour, such as whether a taxpayer took reasonable care

This is long overdue. The current system penalises errors and failures inconsistently, especially where reasonable care or human error can be demonstrated.

Comment: Most tax advisers will support efforts to make penalty regimes clearer and fairer. A shift towards a more education-first model could help reduce errors without overly penalising honest mistakes. The final shape of these reforms will depend heavily on the responses gathered during consultation.

Research and Development tax relief: Advance clearance proposals

The R&D tax relief regime continues to be a hot topic. While the merger of SME and RDEC schemes has already taken place, a new consultation explores the option of introducing advance clearances for R&D tax claims.

This could allow businesses to:

• Secure upfront agreement from HMRC on whether their projects meet R&D criteria
• Reduce the need for post-claim reviews and enquiries
• Improve certainty and reduce fraud and error, which have dogged the scheme

There’s no firm policy yet, but HMRC is clearly seeking a route to streamline processes and prevent abuse – especially after high-profile clampdowns on rogue advisers in the R&D claims space.

Comment: For legitimate claimants, this could be an excellent development. Knowing in advance whether work qualifies would save time, money, and stress. However, the devil will be in the detail: any advance clearance process must be accessible and efficient, or it risks becoming a bottleneck in its own right.

Better use of new and improved third-party data

Another forward-looking move is HMRC’s proposal to improve how it collects and uses third-party data under its bulk data-gathering powers. The aim is to:

• Expand sources of data that HMRC can draw upon
• Improve data quality and accuracy
• Use data more effectively to pre-fill returns, prompt compliance, and detect anomalies

Examples might include:

• Gig economy platforms providing earnings information
• Banks and payment processors offering transaction-level insights
• Real-time property income data from letting platforms

This is similar to pre-filling tax returns in some Scandinavian countries and could drastically improve tax administration if handled correctly.

Comment: As always, balance is key. The idea of reducing error through better data is sound, but privacy and data security must be front and centre. If HMRC starts collecting more data, it must also improve how it explains what it holds, and how it uses it.

Enhancing HMRC’s powers over non-compliant tax advisers

Alongside its focus on avoidance schemes, HMRC is consulting on tougher measures against tax advisers who facilitate non-compliance. This includes:

• New civil and criminal sanctions
• Expanding information powers to uncover hidden adviser-client relationships
• Public naming of advisers with track records of enabling tax avoidance

This aligns with a broader international trend towards holding professional enablers accountable, especially in high-value tax fraud cases.

Comment: While the vast majority of tax professionals are diligent and compliant, there’s an appetite within HMRC to weed out persistent offenders who enable grey-market schemes. The challenge is setting clear definitions so that robust, legal tax planning is not conflated with abusive avoidance.

Broader fiscal context and spending commitments

Outside of tax, the Spring Statement confirmed the government’s commitment to:

• A defence spending increase to 2.5% of GDP by 2027
• £3.25 billion for a new public sector transformation fund focusing on AI and tech
• Further work on the childcare and work incentives agenda to encourage people into employment

The welfare reform package – including changes to Personal Independence Payments and Universal Credit – has drawn criticism from some quarters, particularly disability rights groups. However, the Treasury is standing firm on needing to reduce what it calls "unsustainable welfare spending."

Final thoughts

Spring Statement 2025 didn’t deliver any dramatic tax rate changes or giveaways, but that was never likely. Instead, it focused on long-term system modernisation, stricter enforcement, and targeted reforms that could reshape how HMRC interacts with taxpayers and advisers.

For tax professionals and small business owners, the key takeaways are:

• The expansion of MTD for IT is real, though delayed
• Compliance standards are being tightened, with emphasis on behaviour and third-party data
• HMRC wants to be more proactive, both in stopping avoidance and in supporting legitimate claims, like R&D
• The next few years will require investment in systems, understanding of HMRC’s new powers, and ongoing engagement with consultations

None of these changes will happen overnight, but the direction of travel is clear: more digital, more data-driven, and more interventionist.

Asking your bank for a business loan can feel daunting, but it doesn’t have to be. With the right preparation, you can give yourself the best possible chance of getting a positive outcome.

Start with a clear purpose
Banks want to know why you need the money. Are you looking to grow, cover short-term cash flow gaps, or invest in new equipment? Be specific. A well-defined reason gives your request more weight.

Get your figures in order
Before approaching the bank, make sure your accounts are up to date and accurate. Be ready to provide recent financial statements, cash flow forecasts, and details of any outstanding debts. Banks want to see that you understand your numbers and can manage repayments.

Create a solid business plan
A clear, realistic business plan is vital. It should outline what your business does, your market, how you make money, and your plans for growth. Include how the loan will help, and how you intend to pay it back. This builds trust and shows that you’ve thought things through.

Know your credit position
Check your business and personal credit scores in advance. If there are issues, be ready to explain them. Banks will always consider risk, so transparency is important.

Be realistic and professional
Ask for a sensible amount based on your business size and turnover. Approach the meeting professionally—treat it like pitching to an investor. Be confident but open to questions.

Consider alternatives
If your bank says no, ask for feedback. You could explore government-backed schemes like the British Business Bank or look into alternative lenders and credit unions.

Preparation, clarity, and confidence go a long way when asking your bank for support.

Recessions can be tough on small businesses, but they do not have to spell disaster. With some smart thinking and a bit of planning, many firms can keep going and even emerge stronger once the economy picks up. Here are some practical ways to stay afloat when times are hard.

1. Cut back on unnecessary spending
Now is the moment to go through all your costs. Cancel anything you no longer use, negotiate better deals with suppliers, and look for savings wherever you can. Every bit helps.

2. Focus on what you do best
Stick to your most profitable products or services. When money is tight, it makes sense to concentrate on the parts of the business that bring in the most value.

3. Build strong relationships with customers
Your regular customers are more important than ever. Stay connected, offer good service, and look for ways to add value. People are more likely to stick with businesses they trust.

4. Keep an eye on cash flow
Having enough cash to cover the basics is vital. Chase late payments, offer discounts for early payment if it helps, and try to agree flexible terms with suppliers.

5. Find new ways to earn
Could you offer something new? Sell online? Reach a different group of customers? Exploring extra income streams can give your business a welcome boost.

6. Stay in the public eye
It may be tempting to cut back on marketing, but staying visible is key. Use low cost tools like email newsletters, social media, and local events to keep your name out there.

7. Look after people
A business is only as strong as the people behind it. Support your team and yourself. Good morale and clear communication can make a big difference during uncertain times.

A calm, steady approach and some flexibility can go a long way in helping your business come through a recession in good shape.

When selling a business, the Transfer of a Business as a Going Concern (TOGC) rules can allow the transaction to be VAT-free if key conditions are met. This prevents unnecessary VAT charges and ensures compliance with HMRC. Learn how TOGC applies to your sale.

A TOGC is defined as "neither a supply of goods nor a supply of services” meaning it falls outside the scope of VAT and no VAT would be charged on the sale.

For the TOGC rules to apply, all of the following conditions must be satisfied:

• The assets must be sold as part of a business that is operating as a "going concern." This means the business must be actively running, not just an 'inert aggregation of assets'.
• The purchaser must intend to use the assets to carry on the same type of business as the seller.
• If the seller is a taxable person, the purchaser must either already be a taxable person or become one as a result of the transfer.
• If only part of the business is sold, it must be capable of operating independently.
• There must not be a series of immediately consecutive transfers.
• Additional conditions apply to transactions involving land.

The TOGC rules can be complex, and both the seller and buyer need to ensure they comply with all the conditions. These rules are mandatory, so it's crucial to establish whether a sale qualifies as a TOGC from the outset. For example, if VAT is charged incorrectly, the buyer cannot recover it from HMRC and would need to seek reimbursement from the seller.