Spring Statement 2025: What It Means for Small Businesses in the North West

The UK Spring Statement 2025, delivered by Chancellor Rachel Reeves, has introduced several key measures that will impact small businesses and owner-managed companies across the North West. While the statement did not announce new tax increases, it highlighted existing changes set to take effect from April 6, 2025, which businesses should prepare for.

Employer National Insurance Contributions (NICs)

One of the most significant changes is the increase in employer NICs from 13.8% to 15%, coupled with a reduction in the threshold at which employers start paying NICs from £9,100 to £5,000. To mitigate the impact on small businesses, the Employment Allowance will rise from £5,000 to £10,500, and the £100,000 cap on eligibility will be removed. This means more businesses can benefit from reduced NICs liabilities, potentially saving up to £5,000 annually.

Capital Allowances and Corporation Tax

The government has confirmed that the rates of Corporation Tax will remain unchanged, with the main rate staying at 25% for companies with profits over £250,000. The 19% small profits rate will apply to companies with profits of £50,000 or less. For companies with profits between £50,001 and £250,000, a marginal relief applies, resulting in an effective rate between 19% and 25%. Additionally, the Annual Investment Allowance remains at £1 million, allowing businesses to write off qualifying capital expenditure against their taxable profits.

VAT and Making Tax Digital (MTD)

From April 2025, businesses will face stricter VAT late payment penalties. If VAT is overdue by 15 days, a 3% penalty applies; by 30 days, an additional 3% is added; and for amounts overdue by 31 days or more, a 10% annual penalty plus daily interest is charged. To avoid these penalties, businesses are encouraged to adopt MTD-compliant software for VAT submissions and set up direct debits to ensure timely payments.

Employment Costs and Wage Increases

The National Living Wage will increase to £12.21 per hour for workers aged 21 and over, benefiting over 3 million low-paid workers. This increase will raise wage costs for businesses, particularly in sectors like retail, hospitality, and care. Employers will need to adjust their budgets and consider potential cost-cutting strategies to manage these higher expenses.

Looking Ahead

While the Spring Statement did not introduce new tax changes, the existing measures set to take effect in April 2025 will have a significant impact on small businesses. It’s crucial for business owners to review their financial strategies and ensure compliance with the upcoming changes. At McKendrey Accountants LTD, we’re here to provide expert advice and support to help local businesses navigate these changes and continue to thrive.