Spring statement 2025: MTD for income tax, NI changes & HMRC penalties for freelancers
Chancellor Rachel Reeves’ Spring Statement 2025 confirmed significant tax changes for the self-employed, including new MTD for Income Tax deadlines, higher employers’ NI rates, and stricter HMRC penalties for late payments. Here’s how freelancers, contractors, and landlords will be affected.
Making Tax Digital (MTD) for income tax: timelines, exemptions, and gaps
The Spring Statement 2025 confirmed the MTD for Income Tax rollout dates, with freelancers and landlords required to comply from April 2026 if earning over £50,000. Smaller businesses will follow in 2027–2028.
How to prepare for MTD for income tax:
- April 2026: Mandatory for self-employed individuals and landlords with income over £50,000.
- April 2027: Applies to those with income over £30,000.
- April 2028: Extended to most self-employed professionals and landlords with income over £20,000.
Key exemptions include:
- Individuals with Power of Attorney.
- Non-UK resident entertainers/sportspeople without other qualifying income.
- Taxpayers unable to access HMRC’s digital services.
- Ministers of religion, Lloyd’s Underwriters, recipients of the Blind Person’s Allowance, and those claiming the Married Couple’s Allowance (available only if one spouse was born before 6 April 1935).
Note: This is distinct from the Marriage Allowance, which remains unaffected.
No updates for partnerships or MTD for Corporation Tax: The Spring Statement did not clarify timelines for partnerships or the expansion of MTD to Corporation Tax. These remain under review.
Final tax returns via software: From April 2026, all MTD users must submit their Final Declaration through MTD-compatible software, replacing the previous hybrid filing option.
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Increased penalties for late MTD payments in the Spring Statement
New HMRC penalties for late tax payments take effect from 6 April 2025, with charges increasing to 3% (from 2%) for MTD for income tax and VAT submissions. Freelancers and contractors should prioritise timely filings to avoid costly fines:
- 15–29 days late: 3% penalty (up from 2%) on outstanding amounts.
- 30+ days late: Additional 3% penalty + 10% annual charge on unpaid sums.
These changes align with the Autumn Budget 2024 announcement on interest rate increases for late payers.
Employers’ National Insurance contributions: no reversals in the Spring Budget
The Spring Statement 2025 confirmed no U-turn on the employers’ NI increase to 15%, effective April 2025. Small businesses should review payroll systems ahead of the change, though the higher £10,500 employment allowance may offset costs for some:
- Rate increase: Employers’ NI rises from 13.8% to 15% (on earnings above £5,000, subject to Employment Allowance).
- Employment Allowance: Increased to £10,500, with the £100,000 eligibility threshold removed.
- Employers should also prepare for updates to the national living wage and national minimum wage, effective April 2025.
HMRC enforcement: expanded powers and resources
With 500 new compliance officers and a whistleblower reward scheme, HMRC is intensifying its fight against tax evasion. Freelancers and landlords should ensure their records are MTD-compliant to avoid scrutiny.
- 500 new compliance officers and 600 debt management staff to bolster enforcement.
- £87 million investment in partnerships with private debt collection agencies and a pilot scheme to recover aged debts.
- Whistleblower rewards: a new scheme (modelled on U.S. and Canadian programmes) will incentivise reporting of tax evasion, particularly offshore and corporate avoidance.
- Crackdown on “phoenix companies”: enhanced collaboration between HMRC, Companies House, and the Insolvency Service to hold directors personally liable for tax debts and increase enforcement sanctions.
Need help with MTD for income tax or Spring Statement 2025 changes? Our accountants specialise in tax compliance for freelancers, contractors, and landlords. Check also our quiz: how tax-ready are you?
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