As spring blossoms and Easter approaches, we welcome you to the April 2025 edition of the Mercian Accountants newsletter. As this season brings renewal, the new tax year offers fresh opportunities to get your finances in order.

With key updates from the Spring Statement, now is the time to review your tax position – whether it’s self-assessment, business taxes, or future planning. We’re here to help you stay compliant and make the most of any savings (hopefully more than just Easter eggs!). Read on for the latest news, and feel free to get in touch. Wishing you a joyful Easter and a prosperous spring!

Spring Statement 2025

On 26 March 2025, Chancellor Rachel Reeves presented her Spring Statement to parliament. Despite a backdrop of low economic growth and increasing government borrowing costs, the Chancellor remains committed to her ‘non-negotiable’ fiscal rules that aim to bring stability to the economy and security for working people. With further borrowing ruled out and a determination not to announce further tax changes, her focus has been on government spending, a review of which will be announced on 11 June 2025. This will allocate government spending for the three years from 2026/27 to 2028/29.

A number of the news articles below were announced on 26 March, as part of the Chancellor’s update.

Self-Assessment

The High-Income Child Benefit Charge (HICBC)

You may have to pay the HICBC if your income exceeds £60,000 and child benefit is being paid in relation to a child that lives with you, regardless of whether you are a parent of that child. If you are living with another person in a marriage, civil partnership or long-term relationship, you will only be liable to the HICBC if you are the higher earner of the two of you.

For 2025/26, the HICBC is calculated at 1% of the child benefit received for every £200 of income above £60,000. This means that child benefit is fully clawed back where income exceeds £80,000.

From summer 2025, if you are an employee who is liable to pay the HICBC, you will be able to use a new digital service to declare the charge and opt to pay it directly through PAYE, without the need to register for self-assessment.

Taxable income and self-assessment tax returns

If you are undertaking a commercial venture with a plan to make profits (e.g. buying stock to resell), tax may be due on the profits made. However, if your commercial venture is generating trading or property rental income of less than £1,000 a year, this is disregarded for tax purposes. This often covers small income-generating activities such as dog walking or creating content online.

Once the £1,000 limit has been exceeded, it is necessary to report your ‘taxable activity’ to HMRC.

At present, if you have trading income over £1,000, you are required to submit a self-assessment tax return every tax year. This applies even if your affairs are otherwise quite simple. The Chancellor has announced that a new simple online service will be developed in future to allow those with trading income between £1,000 and £3,000 to report their trading income and pay any tax they owe, without necessarily requiring a full self-assessment tax return. Those without tax to pay will not need to report their trading income at all.

If your trading income exceeds £3,000, you will remain in the self-assessment tax system.

If your trading and property rental income exceeds £50,000, make sure you read the next section. A fundamental change to income tax reporting will be in place from April 2026!

Digital record keeping and quarterly reporting requirements for traders and landlords (“MTD”)

Updates continue to come through on HMRC’s ‘Making Tax Digital for Income Tax’ (‘MTD for IT’) initiative. It will initially apply from 6 April 2026 for sole traders and property landlords who generated gross trade and rental income (‘qualifying income’) of more than £50,000 in the 2024/25 tax year.

This will be followed by those with a qualifying income of more than £30,000 in the 2025/26 tax year, who are mandated to comply from 6 April 2027.

It has now been announced that those with qualifying income over £20,000 in 2026/27 will be mandated to comply from 6 April 2028.

The MTD for IT rules are mandatory and, if affected, you will be required to use ‘MTD-compatible software’ to maintain digital records and send a quarterly summary of your business and/or property income and expenses to HMRC. This will be in addition to an end-of-year tax return. It has now been confirmed that, for those mandated into MTD for IT, the end-of-year tax return must also be submitted using MTD-compatible software. It will not be possible to use a free HMRC online service.

Other MTD for IT changes announced at the Spring Statement were:

• A limited list of types of individuals who will have an exemption or deferral from MTD for IT.
• Those with 31 March year ends can start complying with the MTD for IT requirements on 1 April instead of 6 April, which will remove the need for manual adjustments at the start of the tax year.

There are various ways to remain compliant under the new rules, and options exist to ‘trial’ the new MTD system voluntarily before its start date of 6 April 2026. Please talk to us if you would like to know more.

Employment Taxes

Employer National Insurance Contributions (NICs)

Please remember that the significant changes to the NICs paid by employers will start to apply from 6 April 2025. An increase in the rate of employers’ NICs from 13.8% to 15% is combined with:

• A decrease in the threshold at which an employer starts to pay NICs on each employee’s salary from £9,100 to £5,000*.

* A higher threshold of £50,270 applies for employees who are under 21 and apprentices under 25. Other variations can also apply.

• An increase in the amount of the ‘employment allowance’, which eligible employers can offset against their employers’ NICs liability, from £5,000 to £10,500.
• A relaxation in the rules that determine which employers are eligible for the employment allowance. Until 5 April 2025, the employment allowance has only been available to businesses with a prior tax year employers’ NICs liability of less than £100,000. This rule no longer applies for 2025/26, meaning employers may be able to access the £10,500 allowance, even if their 2024/25 employers’ NIC cost exceeded £100,000. Other restrictions on claiming the employment allowance still apply (including a limit of just one allowance between connected employers), so please do check with us if you are unsure whether you are able to make the claim or how to do so.

Taxes On Capital Assets

Capital Gains Tax (CGT)

As we head into 2025/26, it should be remembered that, for most sales of capital assets, CGT will apply at 18% for basic rate taxpayers and 24% otherwise. The Business Asset Disposal Relief (BADR) rate of CGT for eligible business disposals will increase from 10% to 14%, with a further uplift to 18% planned for 6 April 2026.

Timing is important, particularly in relation to business disposals, so please talk to us about optimising your tax position prior to any capital disposal.

IHT reliefs for business owners and farmers

The government is continuing with its plans to reform IHT agricultural property relief (APR) and business property relief (BPR) from 6 April 2026. A consultation process is underway on the particular impact when using trusts.

Relief of up to 100% of asset value is currently available on qualifying business and agricultural assets. From 6 April 2026, it is proposed that the 100% relief will apply on up to £1 million of combined agricultural and business property, with the relief reducing to 50% on the value that exceeds £1 million.

Another April 2026 change will reduce the BPR available on AIM shares and similar from 100% to 50%.

Care is needed when planning for these changes, as the rules are not yet certain and even gifting before 6 April 2026 will not necessarily achieve the desired effect. Please talk to us about how best to organise your estate with business or agricultural assets.

Business Tax Matters

Electronic invoicing

The government recently launched a consultation on the possible advantages of e-invoicing, which include productivity enhancements, cash flow acceleration, and error reductions. The consultation also considers how HMRC can support investment and encourage uptake within the business community.

Trading with the USA and other international partners

While uncertainties around global trade and tariffs continue, the government is expressing ambitions to support digitalised trade and supply chains, bringing cross-border trade into the 21st century.

In particular, a new digital pilot with the USA to test ways to speed up trade processes for USA and UK businesses will soon commence.

Corporate Taxes

April / May 2025

The Spring Statement 2025 has set the stage for key tax and economic changes, from updates to self-assessment and digital tax reporting to shifts in capital gains, business taxation, and employment taxes. With new compliance rules, evolving regulations, and digital advancements on the horizon, staying informed and prepared is more important than ever.

As we enter the 2025/26 tax year, now is the time to review your tax position, plan ahead, and ensure you’re making the most of available allowances and reliefs. If you have any questions or need guidance, we’re here to help – so don’t hesitate to get in touch.

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