Spring 2025 tax update: simplification, administration, and reform

The UK Government has announced a package of tax and customs administration and simplification measures aimed at reducing administrative burdens, providing greater certainty, and allowing businesses to focus on growth.

Below we have outlined the key changes that may affect you and your business.

Mandating the payrolling of Benefits in Kind (BiK)

The start date for mandatory payrolling of BIK has been delayed by one year to 6 April 2027. From this date, employers will be required to report and collect Income Tax and National Insurance on Benefits in Kind (such as company cars and private medical insurance) through payroll. This replaces the current optional system, aiming to simplify administration and reduce P11D filings.

HMRC has published a technical note to guide employers in preparing for these changes. Loan and accommodation BIKs are excluded from mandatory payrolling due to valuation complexities but can be voluntarily payrolled from April 2027.

Extension of voluntary payrolling in 2026/27

Employers will have the opportunity to adopt voluntary payrolling of benefits more easily from April 2026, ahead of the mandatory requirement.

Personal Tax

More taxpayers will be removed from Self Assessment obligations if they have simple tax affairs (e.g., individuals with PAYE-only income). This reduces the burden on individuals and HMRC alike.

The government will align the online thresholds for requiring an income tax self-assessment return to
a gross income of £3,000 for:

• Trading income.
• Property income (currently £2,500 profit or £10,000 gross income).
• Other taxable income (currently £2,500).
  Further details, including alternative reporting mechanisms, will be provided later this year.

Cultural Gift Scheme: Reforms will remove restrictions on jointly owned objects and allow more
flexible use of tax credits.

Business Tax

Corporate Interest Restriction (CIR): The government will consider options to simplify and improve the CIR, particularly the requirement for a group to nominate a reporting company.

International Tax Rules: Draft legislation is being consulted on to:

• Simplify transfer pricing rules, including UK-to-UK transactions.
• Align the UK with international standards on permanent establishments.
• Repeal the diverted profits tax and introduce a new provision for unassessed transfer pricing profits
  within corporation tax rules.

Restitution Interest: Draft legislation aims to clarify that the 45% corporation tax rate applies only to
awards made at interest rates exceeding statutory rates and to permit assessments within two years of the end of the accounting period when the restitution claim is determined.

Employment Status and Related Updates

CEST Tool Update: HMRC will revise its Check Employment Status for Tax (CEST) tool and update its guidance to make it easier to use, effective from 30 April 2025.

Employment-Related Securities (ERS): From 1 May 2025, employers making a joint election to transfer an ERS National Insurance Contributions (NIC) liability to an employee will no longer need HMRC pre-approval if using the template election on GOV.UK.

NIC Annual Maximum Refunds: The government will review the process to make it easier and faster for individuals to claim a NIC refund after the end of the tax year.

VAT and Customs Duties

Capital Goods Scheme (CGS): Simplification measures include removing computers from CGS
assets and increasing the capital expenditure threshold for land, buildings, and civil engineering work from £250,000 to £600,000 (exclusive of VAT).

Donations to Charity: The government is seeking views on introducing a new VAT relief for goods
donated by businesses to charities.

Temporary Admission (TA): Changes to TA procedures will:

• Extend and simplify timing requirements.
• Improve user experience and guidance.
• Remove restrictions on accessing TA and the use of certain goods under TA.

Tax Administration and Compliance

Dispute Resolution: The government is seeking views on modernising HMRC’s approach to dispute
resolution, focusing on alternative dispute resolution and statutory review processes.

Tackling Non-Compliance: HMRC will consider reforms to revenue correction powers and approaches to taxpayer self-correction, aiming to harmonise and simplify compliance powers across tax regimes.

Valuation Office Agency (VOA): The functions of the VOA will be integrated with HMRC by April 2026.

HMRC guidance and communications:

• Clarify guidance on self-assessment registration criteria.
• Simplify language in communications.
• From June 2025, cease issuing six types of corporate tax letters to reduce taxpayer correspondence.
• Facilitate the use of GOV.UK guidance in AI-powered products and services.

What this means for you

• Employers should prepare for the move to mandatory payrolling of benefits by reviewing payroll systems and employee benefits structures.
• Businesses involved in import/export should watch for further detail on customs process changes.
• Individuals with straightforward tax affairs may no longer need to file a Self-Assessment return,
  simplifying their annual tax compliance.
• Businesses using EMI or CSOP should monitor the upcoming consultation to see how schemes may become more accessible.

We can advise on any impact these changes may have on your business operations and compliance obligations. For further information get in touch with our tax team on 01903 234094.