Spring 2025 tax update – key simplifications and what they mean for you

The government has announced a new package of tax and customs administration reforms with the which it says will ease the burden on businesses and individuals, improve compliance and pave the way for a more modern, digital first tax system. Here’s a breakdown of the most relevant changes and what they could mean for you.

Personal tax - simplifying self assessment

In a move to reduce compliance for individuals with simple tax affairs, HMRC plans to remove more taxpayers from self assessment, for example individuals with PAYE only income.  From 2025/26, income thresholds for requiring a tax return will align at £3,000 gross income for:

• Trading income
• Property income (currently £2,500 profit or £10,000 gross)
• Other taxable income (currently £2500)

Alternative reporting methods will be introduced in due course.

Business tax - modernising and aligning

Several reforms are in progress including:

• Corporate interest restriction (CIR) - considerations to simplify CIR and the requirement for a group to nominate a reporting company.

• International tax rules - draft legislation aims to streamline transfer pricing rules, align UK rules with international standards and repeal the diverted profits tax and introduce a new provision for unassessed transfer pricing profits within corporation tax rules.

• Restitution interest - the 45% tax rate will now only apply to high interest awards, with assessment windows clarified.

Employment and payroll updates

• Check employment status for tax (CEST) - HMRC was to release an improved version and updated guidance by 30 April 2025.

• Employment related securities (ERS) - from 1 May 2025 employers making a joint election to transfer an ERS national insurance contributions (NIC) liability to an employee will no longer need HMRC pre approval if using the template election on GOV.UK.

• NIC refund process - review will aim to make post-year-end NIC refunds faster and easier for individuals.

VAT and Customs - key changes

• Capital Goods Scheme - computers will be excluded and the capital expenditure threshold for land, buildings and civil engineering work will rise from £250,000 to £600,000.

• Charitable donations - the government is exploring VAT relief on goods donated to charities.
• Temporary admission (TA) - reforms will simplify timing and usage requirements for certain imported goods.

Administration and compliance

• HMRC communications - from June 2025, six types of corporate tax letters will be discontinued.

• Valuation Office Agency (VOA) - the VOA will be integrated into HMRC by April 2026.

• Dispute resolution - a consultation will consider improvements to statutory reviews and alternative dispute resolution methods.

• Tackling non compliance - proposals are in motion to harmonise compliance powers and encourage self correction.

Benefits in kind - mandatory payrolling delayed

The mandatory payrolling of benefits in kind, such as company cars and private medical insurance has been postponed by a year.  From 6 April 2027, employers will be required to report and deduct income tax and national insurance through payroll, replacing the current P11D system.

Loan and accommodation benefits will be excluded from this mandatory change, because of the complexities around valuation although voluntary payrolling will be permitted from the same date.

Employers can opt in voluntarily from April 2026.

What should you do now?

• Employers should assess their payroll systems and benefits processes ahead of the benefit in kind payrolling changes.

• Individuals with straightforward tax affairs may benefit from the simplified self assessment rules.

• Businesses involved in international trade should monitor updates to customs procedures.

• Those operating EMI or CSOP schemes should stay informed about upcoming consultations to enhance access.

If you'd like help understanding how these changes may affect you or your business, get in touch with our team.