The UK government presented their Spring Statement on 26 March 2025. This has made headlines for the changes to personal independence payments and plans to encourage more people experiencing disability into the workforce. Here we examine what measures will apply to SMEs, what these mean for your business and what actions you can take to ensure success.
Fiscal Headroom
The Chancellor Rachel Reeves had plans to leave herself a comfortable £9.9bn of headroom until the Office for Budget Responsibility (OBR) more recently calculated that the UK was in fact heading for a deficit of £4.4bn. In response to this news Ms Reeves announced her spending cuts to welfare and across the civil service in an effort to try to maintain the headroom she had been expecting. In a press conference delivered after the Spring Statement, Tom Josephs, OBR committee member, stated that the headroom was at risk of collapsing due to poor UK productivity and escalating global trade tensions. Let’s find out what that means for UK businesses and what you can do to ensure you can trade securely.
How the Spring Statement Affects Your Business
As expected, the Chancellor maintained her pledge to not raise National Insurance, income tax or VAT rates. A drop in UK inflation also announced on the same day will help many businesses that have been struggling to keep up with rising costs. However, the rise in employers’ National Insurance and increase to minimum wages announced in their Autumn 2024 statement remain intact, continuing to affect many small and medium-sized enterprises (SMEs) in a variety of ways.
Making Tax Digital
Sole traders and landlords who have qualifying income of over £20,000 will have to comply with Making Tax Digital for Income Tax from April 2028, according to the Spring Statement 2025. For sole traders and landlords with qualifying income over £50,000 the legislation will come into force from April 2026. Those earning over £30,000 will be legislated to comply from April 2027. In addition exemptions have been extended to include foreign entertainers or sports people, taxpayers who have a power of attorney, taxpayers for whom HMRC “can’t provide a digital service” due to special circumstances
Increase to Late Payment Penalties
The government announced an increase in late payment penalties for VAT taxpayers, and Self Assessment income tax payers as they join Making Tax Digital, from April 2025 onwards. The new rates are 3% of the amount of outstanding tax, where tax is overdue by 15 days, plus 3% where tax is overdue by 30 days, plus 10% per annum where tax is overdue by 31 days or more. You can avoid these penalties by allowing plenty of time to file, whether you file for yourself or submit the detailed information required, to your accountant to file on your behalf.
Business Rates
In the 2024 Autumn Budget, the government committed to a longer term reform of the business rates system in order to support high streets and boost investment.
In the summer of 2025, it will publish an interim report that sets “clear direction” for the business rates system, with further policy detail to follow in the 2025 Autumn Budget.
Growth Forecasts
The Chancellor announced that growth forecasts for 2026 and beyond have accelerated thus: 2026: 1.9%, 2027: 1.8%, 2028: 1.7%, 2029: 1.8%
Despite the less encouraging news that the forecast for UK growth in 2025 has halved from 2% to 1%.
Capital Spending
The government has announced that it will increase capital spending by £13 billion to boost growth in industries delivering infrastructure, housing, and defence innovation. This is in addition to the £100 billion increase in capital spending announced in autumn 2024.
UK Defence Innovation
Businesses working in the defence sector will benefit from the government’s commitment to military spending and opening up procurement to more innovative firms and startups in the sector. In her Spring Statement Ms Reeves pointed to the UK Defence Innovation (UKDI) initiative, which was announced in February 2025 and will enable innovative technology firms and startups to rapidly develop projects. The idea is that UKDI will drive faster procurement of innovation, unlocking wider economic benefits of the defence industry, whilst developing a robust and forwards looking UK defence technology sector. UKDI is scheduled to be active by July 2025, with a budget of £400 million from April 2026, which is due to increase in the future.
Planning and Infrastructure Bill
Ms Reeves highlighted the Planning and Infrastructure Bill, introduced earlier in March 2025. This should introduce a number of measures intended to streamline planning processes and unlock a “new scale” of housing and infrastructure by speeding up planning consent and decision-making processes, for example. The Chancellor also pledged to invest an additional £2 billion in social and affordable housing in 2026/27.
Construction and Apprenticeships
The Construction Industry Training Board (CITB) is opening submissions up to double the number of new entrants it can accept into its programme. This is to support employers, particularly small businesses, in recruiting and retaining apprentices. Additionally CITB has committed £32 million to top-up the government’s £100 million investment to support over 40,000 construction industry placements, annually. The government is also launching an £80 million capital fund to help employers deliver training customised to their needs.
Industrial Strategy
The government intends to publish its Industrial Strategy in Spring 2025. This will lay out the joint 10 year long plan between government and industry’s eight growth-driving sectors, for investment and accelerated expansion, including advanced manufacturing, clean energy and creative industries. It is noted that the largest employing sectors of healthcare and hospitality, are not currently included in this strategy and weren’t mentioned in the Spring Statement. Despite facing increasing costs as a result of the increases to employers’ National Insurance, as well as National Minimum Wage and National Living Wage costs.
How to Prepare for the “Changing World”
SMEs face increasing costs over the coming months affecting planning, investment and hiring decisions. Although the government appears to be aiming for consistency and efficiency. The Chancellor repeatedly referred to the “changing world” we now live in, as an influencing factor on the UK economy. It’s essential for business owners like yourself to understand the wider context of her statement and what to expect. Currently the government is left with relatively limited fiscal headroom and this has the potential to be lost altogether if the upcoming US tariffs substantially impacts global trade. Your business will need to be at its most dynamic and agile in 2025. Firstly make sure you have a robust business plan, and that you are equipped to take advantage of any new opportunities within your sector. Review what the priorities are for your business and potentially decide what should wait until we have a more complete picture of what we can expect from upcoming changes to the global economy. Of course forecasts are difficult to make during uncertain times. However, considering different courses of action ahead of implementing them can be invaluable. Prepare various plans for if a) occurs, or what to do when b) happens. Make sure you have all of your software and business processes and platforms up to date so you don’t get delayed if you are forced to make changes in a hurry.
Client Relationship Management
We all appreciate loyal clients. Responsive client relationship management (CRM) can help to keep the best ones close. Keep your marketing specialists well informed and let them help you communicate effectively with your market. Maintaining loyalty can be as valuable, if not more stabilising, than growth in fluctuating markets.
Rely on Your Best Employees
You will need talented employees who are primed to act in the face of a rapidly changing economy. There is a wealth of new and advanced technology such as AI that can help you meet the many varying challenges. Ensure you have the right expertise in your finance team and expert business advisor at your disposal so you can make quick decisions with confidence.
At Prestige Business Management we can help your Business
At Prestige Business Management we can help your business understand the best solutions for the success of your business. Find out what we can do for you. Call us today on 0203 773 2927.
