HMRC has just announced some major changes to the UK tax system as part of its Spring 2025 update. These updates aim to simplify how tax is reported and make life easier for small businesses. If you’re self-employed, run a partnership or manage a limited company, here’s what you need to know and what actions you may need to take.
📘 Cash Basis Becomes the New Default
What’s new?
From the 2024–25 tax year, self-employed people and partnerships will automatically use the cash basis to calculate their profits. Until now, you had to choose this method and only if your turnover was below £150,000.
What does this mean for you?
- Simpler accounting – You only report income and expenses when money changes hands. No need to worry about unpaid invoices or bills.
- More tax relief – You can now claim full interest expenses (no more £500 cap).
- Flexible loss rules – You’ll have more options to offset business losses.
What to do:
Check if the cash basis suits your business better than your current method. You might save time and money.
📈 Higher Threshold for Self-Assessment
What’s new?
You now only need to register for Self-Assessment if your trading income (not profit) is over £3,000, up from £1,000.
Why it matters:
- If you’re a small side business or a hobby seller, you may no longer need to file a tax return.
- Less paperwork = more time for your business.
What to do:
Look at your total sales from April 2024 onwards. If you’re under £3,000, you might be off the hook for Self-Assessment.
👥 Changes to Off-Payroll Working (IR35)
What’s new?
From 6 April 2025, the rules for deciding if your company is ‘small’ under IR35 are changing:
- Turnover: up to £15 million
- Balance sheet: up to £7.5 million
- Employees: still 50 or fewer
Why it matters:
If your business now qualifies as ‘small’, you may no longer have to handle certain IR35 checks for contractors.
What to do:
Review your company size. You could benefit from fewer compliance rules.
💻 Payrolling Benefits in Kind – Coming Soon
What’s new?
From April 2027, you’ll have to report and pay tax on employee benefits (like company cars or gym memberships) through your payroll system.
Why it matters:
- Makes reporting simpler tax is handled in real time.
- Your payroll software must be up to the task.
What to do:
Start planning now. Check if your current systems can handle these changes before 2027.
🏗️ Simplified Capital Goods Scheme (CGS)
What’s new?
- Computers will no longer count under CGS.
- The threshold for reporting land, buildings and engineering works goes up to £600,000 (excluding VAT).
Why it matters:
- Less admin.
- Fewer complex VAT calculations.
What to do:
Review how you report VAT on large purchases to make sure you’re aligned with the new rules.
⏱️ No New Reporting of Employee Hours
What’s new?
HMRC has cancelled its plan to require employers to report more detailed employee working hours from April 2026.
What to do:
Nothing for now, just continue with your usual PAYE reporting.
✅ Final Thoughts
These changes are part of HMRC’s bigger plan to modernise the tax system and make things easier for small businesses. It doesn’t mean you can sit back. Now’s the time to:
- Review your systems
- Update your accounting methods
- Check your reporting thresholds
If you are unsure how any of these changes affect you or your clients, we are here to help. Get in touch and we will guide you through the steps.
Please see another An Accounting Gem blog: https://www.aag-accountants.co.uk/dont-overpay-tax-in-july-2025-could-you-reduce-your-self-assessment-payment-on-account/
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