Spring Statement 2025: What small businesses and sole traders need to know

Chancellor Rachel Reeves’ Spring Statement for 2025 was a measured affair, focusing on steady reforms rather than dramatic changes. While the broader economic backdrop is challenging, growth forecasts have been trimmed to just over 1% and borrowing costs are climbing. Many of the announcements have practical implications for small businesses and sole traders.

Here’s a breakdown of the key measures and how they could affect you:

Making Tax Digital: Slow and steady progress

If you’ve been following the Making Tax Digital (MTD) saga, there’s more breathing room for now. The rollout for MTD for Income Tax (MTD for IT) has been pushed back, with sole traders and landlords earning over £20,000 needing to comply from April 2028. If you’re earning below that threshold, you’re off the hook for now, though HMRC hasn’t ruled out including more people later.

What it means for you:

• You’ll need to use MTD-compatible software for quarterly digital updates.

• HMRC says it’s stepping up support, especially for those who struggle with tech.

This extension gives businesses more time to adapt, but smaller landlords and traders may still face additional costs and some confusion. HMRC really needs to up its game with clearer guidance and better tools this time around.

Cracking down on tax avoidance

The government is stepping up its fight against tax avoidance schemes, targeting so-called “promoters” who sell dodgy tax reduction schemes. New penalties and even criminal charges are being proposed to clamp down on these activities.

What it means for you: Legitimate businesses and advisers likely won’t be affected, but HMRC’s increased scrutiny means it’s essential to ensure your tax planning is above board.

Making penalties fairer

HMRC’s penalty system for tax errors is finally under review. The aim is to simplify the rules and make penalties more proportional—so accidental mistakes (especially when you’ve taken reasonable care) won’t automatically mean hefty fines.

What it means for you: A fairer system could reduce stress for small business owners who may make the occasional honest mistake. Watch this space as consultations progress.

Research and Development (R&D) claims: Advance clearances

A proposal is in the works to let businesses get upfront clearance from HMRC on whether their projects qualify for R&D tax relief.

What it means for you: This could save time and money by giving you certainty before making a claim. However, this process needs to be simple and efficient—or it could end up being another administrative headache.

Using more third-party data

HMRC is looking to expand the use of third-party data, such as earnings info from gig platforms and property income from letting apps. They want to use this data to pre-fill returns and make compliance easier.

What it means for you: If done right, this could make tax returns faster and reduce errors. But with more data being collected, privacy and security will be top concerns.

Tougher measures for non-compliant advisers

HMRC also wants new powers to crack down on tax advisers who enable non-compliance, including naming and shaming persistent offenders.

What it means for you: For most law-abiding businesses, this won’t change much, but it’s a reminder to choose your tax adviser wisely.

Final Thoughts

The government is clearly pushing for a more digital, data-driven approach to tax, while also trying to be fairer and clamp down on bad actors. For small businesses and sole traders, this means:

• Keeping an eye on MTD deadlines and getting software-ready.

• Staying informed about penalty reforms and R&D claim processes.

• Ensuring your tax practices are compliant, especially as HMRC’s powers grow.

The next few years will bring big changes in how taxes are managed, so staying proactive is the best way to avoid surprises.

If you are concerned about anything in the budget or the upcoming changes, please reach out!