Spring Statement 2025: key takeaways for businesses and business owners

By Stuart Noakes, Head of Tax at Carpenter Box.

The UK Spring Statement, delivered on 26 March, offered little by way of new announcements for the business community. Following the Autumn 2024 Budget, described by many as a ‘tax on business’, there was some hope that the Chancellor might soften the blow with revised measures or fresh support. However, the Spring Statement was largely silent on business taxation, instead focusing on welfare reform and labour market re-engagement.

Despite this quiet front, there are a number of significant tax changes either already in motion or on the horizon that business leaders cannot afford to ignore. These measures will impact the cost of employment, the sale of businesses, and long-term estate planning.

Upcoming tax changes

The following changes are already prompting many business owners to reconsider their structure, succession plans and tax strategies:

• National Living Wage increasing by 6.7% from 1 April 2025.

• Employer NICs rising to 15% from 6 April 2025, and kicking in at a lower threshold.

• Employment Allowance increasing from £5,000 to £10,500 from 6 April 2025.

• Capital Gains Tax (CGT) on business disposals rising from 10% to 14% in 2025 and 18% in 2026 under Business Asset Disposal Relief.

• Business Relief for Inheritance Tax (IHT) capped from 2026, with only 50% relief above £1 million.

• Unused pensions to become liable to IHT from 2027.

Employers: rising costs from April 2025

From 6 April 2025, the cost of employment will rise across the board. The rate of Employer National Insurance Contributions (NICs) will increase from 13.8% to 15%, and the threshold at which contributions apply will fall from £9,100 to £5,000. For a business employing someone on an average UK salary of £33,000, this results in an added cost of around £900 per employee, per year.

This is further compounded by the increase in the National Living Wage, which will jump from £11.44 to £12.21 per hour – a 6.7% increase. These dual pressures will hit labour-intensive sectors particularly hard.

To ease the burden slightly, the Employment Allowance, which offsets employer NICs, will increase from £5,000 to £10,500 annually. For smaller businesses, this could help cover the increased cost of employing around six average-wage staff members. However, for medium to large employers, the allowance may offer limited relief.

Capital Gains Tax

Significant changes are also underway for Capital Gains Tax (CGT), particularly under Business Asset Disposal Relief (formerly Entrepreneurs’ Relief), which offers a reduced CGT rate on the sale of qualifying business assets.

From 6 April 2025, the CGT rate under this relief will rise from 10% to 14%, and will rise again to 18% in April 2026. That’s an 8% increase on up to £1 million of lifetime gains, amounting to a potential £80,000 in additional tax for business owners selling their companies.

While still below the general CGT rate of 24%, the incentive to grow and dispose of a business is clearly becoming less generous, prompting a need for early planning and consideration of alternative exit routes.

Inheritance Tax

Currently, shares in trading businesses or business property can qualify for 100% Inheritance Tax (IHT) Business Relief, effectively removing them from the taxable estate. But this is set to change.

From 6 April 2026, Business Relief will be capped on the value of business assets above £1 million, only 50% relief will be available. That means an effective IHT rate of 20% on business interests that were previously fully exempt.

This change will impact many business owners whose companies have grown significantly in value and will make succession planning even more essential, particularly for family-owned firms and agricultural businesses.

Pension funds

Looking slightly further ahead, from 6 April 2027, unused pension savings will become subject to Inheritance Tax. Under current rules, pension funds outside of the estate are often exempt when passed to beneficiaries.

Once the new rule comes into force, any pension savings not drawn down before death will be included in the estate, and taxed at 40%, subject to available reliefs and thresholds. Given that many business owners have built up substantial pensions, this could significantly increase the value of their taxable estate.

Final thoughts

While the Spring Statement introduced no major new tax measures, the path set out in previous announcements is becoming clearer and more costly. The key message? Business owners and employers should be reviewing their tax exposure, employment structures, and succession plans to mitigate the impact of what’s ahead.

Whether it’s restructuring company ownership, accelerating asset disposals, or revisiting pension strategies, proactive planning will be vital in navigating the next few years of tax reform.

Need further guidance?

If you would like more detailed one-to-one advice on any of the above topics, you can get in touch with a member of our *award-winning tax team by calling 01903 234094 or visit

www.carpenterbox.com

*Carpenter Box was named national ‘Tax Team of the Year’ at the 2024 Accounting Excellence Awards.

Information correct as of 26 March 2025.