The Economic Outlook: A Tougher Year Ahead
The latest forecasts from the Office for Budget Responsibility (OBR) paint a more challenging picture compared to last autumn. Key points include:
- GDP growth has been downgraded to 1% for this year (down from the previous 2% prediction).
- Growth expectations for the next four years have been upgraded, suggesting a more positive long-term outlook.
- Inflation is forecast to average 3.2% this year, higher than the previous 2.6% estimate, but it is expected to fall to 2.1% in 2026 and 2% in 2027.
- Without intervention, public finances would fall short of the targets set at the Autumn Budget.
Government Response: Stability and Growth
With the pressure of maintaining stability, the Chancellor stuck to the government’s fiscal rules, reassuring financial markets. Instead of raising taxes, she focused on cutting public spending and implementing policies aimed at growing the economy.
The Statement confirmed:
- No direct tax increases – good news for businesses.
- A commitment to holding one major fiscal event per year, meaning further tax changes will wait until the Autumn Budget 2025.
- Planned reductions in government spending, including welfare reforms and cuts to department budgets.
- A focus on economic growth through policies like supporting homebuilding.
The OBR confirmed that these measures largely restore the public finance targets set last autumn.
How Could This Affect Your Business?
Here are some key measures that may impact you:
Making Tax Digital (MTD)
The expansion of Making Tax Digital for Income Tax (MTD for IT) will bring in sole traders and landlords earning £20,000 or more. If this applies to you, make sure you’re prepared – our separate article on MTD for IT covers everything you need to know.
Business Rates Reform
The government is continuing its review of the business rates system, with an interim report expected this summer. More details will follow in the autumn, which could bring potential changes for high street businesses.
R&D Tax Reliefs: Greater Clarity
- The government is looking at ways to simplify the R&D tax relief process and reduce uncertainty for businesses.
- HMRC may make ‘advance clearance’ assurances mandatory for high-risk claims.
- A potential minimum expenditure threshold for R&D relief is under consultation, with £25,000 being a possible benchmark.
Tackling ‘Phoenixism’
The government is tightening regulations to prevent company directors from abusing the insolvency regime to avoid tax and debts. Measures include:
- Holding more directors personally liable for company taxes.
- Potentially requiring new businesses to make upfront tax payments as security.
Final Thoughts
Some businesses had hoped for relief from the upcoming Employers’ National Insurance changes, but the Spring Statement mainly focused on government spending, welfare, and defence. Any further tax updates will be announced in the Autumn Budget 2025.
If you’re unsure how these changes might affect your business, contact us by email at prosper@sbca.co.uk. We’re here to help you navigate the financial landscape and ensure you’re well-prepared for the future.