As we approach the end of March 2025, anticipation builds around Chancellor Rachel Reeves’s upcoming Spring Statement. Given the current economic landscape, it’s insightful to consider the potential measures she might introduce and their implications for businesses and individuals alike.

Economic Context

The UK economy faces several challenges: sluggish growth, elevated borrowing costs, and persistent inflationary pressures. The British Chambers of Commerce recently downgraded the 2025 growth forecast from 1.3% to 0.9%, highlighting a “long and challenging year” ahead for UK firms. Additionally, global economic uncertainties, such as potential trade tensions, add to the complexity of the fiscal environment.  

Potential Measures in the Spring Statement

1. Spending Cuts
2. Taxation Adjustments
3. Support for Small Businesses
4. Infrastructure and Growth Initiatives
5. Regulatory Reforms

To address the fiscal deficit, Chancellor Reeves is reportedly considering significant spending cuts, particularly in welfare. The Institute for Fiscal Studies warns that without explicit benefit cuts, achieving the desired savings is uncertain. These measures aim to reduce the welfare bill and reallocate resources to other pressing needs.

While Reeves has pledged not to introduce extensive tax hikes, fiscal realities might necessitate subtle adjustments. One possibility is extending the freeze on income tax thresholds beyond 2028, effectively increasing tax liabilities as incomes rise with inflation. Additionally, there might be revisions to existing levies, such as those on agricultural and business assets, to enhance revenue without overtly increasing tax rates.

Recognizing the pivotal role of small businesses in economic growth, the Chancellor may introduce measures to bolster this sector. This could include simplifying procurement processes, especially in defence contracts, to enable smaller firms to compete more effectively. Such initiatives would aim to stimulate innovation and job creation at the grassroots level.

To rejuvenate the economy, Reeves might emphasize infrastructure projects, particularly in regions like the Oxford-Cambridge corridor, aiming to transform it into “Europe’s Silicon Valley.” Investments in transportation, technology hubs, and housing could be on the agenda to spur regional development and attract private investments.

The Chancellor has expressed intentions to dismantle regulatory barriers hindering economic expansion. This could involve overhauling planning processes, expediting approvals for significant projects, and revising ESG financing rules that currently constrain certain industries, such as defence. Such reforms aim to create a more conducive environment for business operations and growth.

It’s hard to see a glimmer of light at the end of this fiscal tunnel. We will be reporting on the actual plans laid before Parliament following the Chancellor’s presentation on 26th March.

As an accountant, we’ve seen businesses thrive-and seen them struggle. One key difference between those that weather storms and those that flounder is simple: planning.

It’s great to be optimistic. No one starts a business expecting it to fail. But while optimism fuels ambition, realism ensures survival. That’s why the old saying holds true: wish for the best, but plan for the worst.

Why It Matters

Running a business is unpredictable. Market downturns, late payments, supply chain issues, and unexpected tax bills can all catch you off guard. Hoping for the best isn’t a strategy-preparing for challenges is.

A lack of financial foresight is one of the biggest reasons businesses struggle. Many companies operate on tight margins, assuming that consistent sales or steady client payments will keep them afloat. But what happens when a key client pays late, or worse, stops trading? What if an economic downturn slashes demand for your services? These scenarios are not just possibilities-they are realities that many businesses face.

How to Plan for the Worst

1. Build a Cash Buffer – A rainy-day fund can cover unexpected costs and give you breathing space when cash flow is tight. Aim for at least three to six months’ worth of expenses.
2. Monitor Cash Flow – Stay on top of your numbers. Regularly review income, outgoings, and potential risks. Spotting problems early allows you to take corrective action before they become crises.
3. Budget for Tax – Don’t get caught out by an unexpected tax bill. Set aside money for VAT, Corporation Tax, and PAYE liabilities so there are no nasty surprises.
4. Review Contracts and Insurance – Ensure you have strong contracts with clients and suppliers, and adequate insurance for potential risks, including business interruption cover.
5. Plan for Economic Downturns – Have contingency plans in place. If sales drop, what expenses can you cut? What alternative revenue streams can you explore?

The Bottom Line

Hoping for success is natural. But a solid financial plan ensures you can manage setbacks without panic. The best businesses aren’t just built on big dreams-they’re supported by smart planning.

If you need help stress-testing your business finances, get in touch. Let’s make sure you’re prepared for anything.

The UK’s shift to the Foreign Income and Gains (FIG) regime from April 2025 changes how foreign income is taxed. If you are a UK resident, get ready to possibly pay UK Income Tax on all foreign earnings – no more non-dom remittance basis.

UK Income Tax is generally payable on taxable income received by individuals including earnings from employment, earnings from self-employment, pensions income, interest on most savings, dividend income, rental income and trust income. The tax rules for foreign income can be very complex.

However, as a general rule if you are resident in the UK you need to pay UK Income Tax on your foreign income, such as:

• wages if you work abroad
• foreign investments and savings interest
• rental income on overseas property
• income from pensions held overseas

Foreign income is defined as any income from outside England, Scotland, Wales and Northern Ireland. The Channel Islands and the Isle of Man are classed as foreign.

If you are not UK resident, you do not generally have to pay UK tax on your foreign income. There are special rules if you work both in the UK and abroad.

The remittance basis rules which allowed non-UK domiciled individuals (often referred to as non-doms) to be taxed only on UK income and gains, is being abolished. From 6 April 2025, the concept of domicile as a relevant connecting factor in the UK tax system has been replaced by a new residence-based regime known as the Foreign Income and Gains (FIG) regime. 

If redundancy strikes, you could receive up to £30,000 tax-free. Whether it’s statutory or a more generous employer offer, understanding your entitlements and the latest caps on weekly pay can make a real difference to your finances.

There is a tax-free threshold of £30,000 for redundancy payments, regardless of whether the payment is your statutory redundancy pay, or a more generous amount offered by your employer.

If you have been employed for two years or longer and are made redundant, you are typically entitled to redundancy pay. The legal minimum you are entitled to receive is known as “statutory redundancy pay.” However, there are exceptions to this entitlement, such as if your employer offers to retain you in your current role or provide suitable alternative employment, and you refuse the offer without a valid reason.

The amount of statutory redundancy pay is determined by your age and length of service, and is calculated as follows:

• Under 22: Half a week’s pay for each full year of service
• Aged 22 to 40: One week’s pay for each full year of service
• Over 41: One and a half weeks’ pay for each full year of service

Weekly pay is capped at £700, with a maximum of 20 years of service considered. The maximum statutory redundancy payment for the tax year 2024-25 is £21,000, with slightly higher limits applicable in Northern Ireland. The cap on weekly pay for redundancy calculations is expected to increase in April 2025, though details have yet to be announced.

Employers may opt to offer a higher redundancy payment, or you may be entitled to an increased amount based on the specific terms outlined in your employment contract.

Health professionals providing medical services may be exempt from VAT if their work falls within their registered profession and primarily protects, maintains, or restores health. HMRC outlines specific exempt services, including diagnosis and treatment.

The VAT liability of goods and services provided by registered health, medical, and paramedical professionals, can be a complex area of tax law. HMRC’s guidance provides clarification on the definition of medical services and outlines the specific health services performed by registered professionals that are exempt from VAT.

If a health professional, as defined by HMRC, provides services, those services are generally exempt from VAT, provided that both of the following conditions are satisfied:

1. The services fall within the profession in which you are registered to practice.
2. The primary purpose of the services is the protection, maintenance, or restoration of the health of the individual concerned.

For VAT purposes, the definition of medical services (including medical care and treatment) is limited to those that meet the second condition outlined above. This includes services such as the diagnosis of illnesses, the provision of analyses of scans or samples, and assisting a health professional, hospital, or similar institution in making a diagnosis.

HMRC provides examples of services that are considered to meet the primary purpose of protecting, maintaining, or restoring a person’s health. These include:

• Health services provided under General Medical Services (GMS), Personal Medical Services, Alternative Provider Medical Services, General Dental Services, and Personal Dental Services contracts
• Sight testing and prescribing by opticians (limited to England, Wales, and Northern Ireland)
• Primary and secondary eye examinations (limited to Scotland)
• Enhanced eye health services
• Laser eye surgery
• Hearing tests
• Treatment provided by osteopaths and chiropractors
• Nursing care provided in a patient’s own home
• Pharmaceutical advice
• Services involving the diagnosis of an illness or the provision of analyses of samples that are a key part of a diagnosis

Additionally, certain insurance or education-related services may also be exempt from VAT, regardless of their primary purpose, as they could qualify under other independent exemptions.

HMRC has launched a new “Help for Hustlers” campaign to help people who are earning extra income, figure out if they need to pay tax on the additional earnings. The campaign runs until the end of March and focuses on five key areas where tax might apply:

1. I’m buying or making things to sell.
2. I’ve got a side gig.
3. I work for myself with multiple jobs.
4. I’m a content creator or influencer.
5. I rent out my property.

The good news is there are two £1,000 tax allowances – one for property income and one for trading income. If you have both types of income, you can claim £1,000 for each.

• Trading Allowance: If you make up to £1,000 from self-employment, casual services (like babysitting or gardening), or renting out personal equipment (such as power tools), this income is tax-free and does not need to be declared.
• Property Allowance: If you earn £1,000 or less from property-related activities (like renting out a driveway), you do not need to report it to HMRC or include it in your tax return.

These allowances cover all relevant income before expenses. If your income is under £1,000, it’s tax-free. If you earn more than £1,000, you can choose to either deduct the £1,000 allowance from your income or list your actual expenses when calculating your taxable profit.

However, if your side hustle income goes over £1,000 in a tax year, you may need to complete a self-assessment tax return. Keep in mind this only applies if you are actively trading or selling services. If you are just clearing out some old stuff and selling it, there is usually no need to worry about tax.

Not sure if your hobby is actually a taxable trade? HMRC uses ‘badges of trade’ to assess whether an activity is a business. Factors like profit motive, transaction frequency, and asset changes help determine if tax rules apply to your earnings.

The ‘badges of trade’ tests, although not definitive, serve as important tools for HMRC in determining whether an activity constitutes a legitimate economic trade or business, or whether it is simply a personal hobby. There comes a point at which a careful and thorough evaluation is required to assess whether what initially started as a hobby has indeed transformed into a taxable activity.

As part of their investigation into whether a hobby has evolved into a trade, HMRC typically examines the following badges of trade:

• Profit-seeking motive
• The number of transactions
• The nature of the asset
• The existence of similar trading transactions or interests
• Changes made to the asset
• The manner in which the sale was carried out
• The source of finance used
• The interval of time between purchase and sale
• The method of acquisition

It is important to note that there is no statutory definition of the term ‘trade.’ The only statutory clarification available is that ‘trade’ includes a ‘venture in the nature of trade.’ As a result, it is the courts that have provided a definition of what constitutes a ‘trade,’ and these decisions serve as a framework for guiding HMRC’s assessments when disputes arise.

The badges of trade have proven to be valuable indicators in numerous cases, providing practical guidance in distinguishing between a hobby and a taxable trade or business.