Yesterday’s Spring Statement by Chancellor Rachel Reeves outlined several significant tax-related measures as part of the government’s broader effort to modernise the UK tax system and strengthen compliance. The changes will affect individuals, sole traders, landlords, and businesses, particularly those interacting with HMRC’s digital services.

Tougher Penalties for Late Tax Payments

One of the headline measures was a tightening of the penalty regime under Making Tax Digital (MTD). From April 2025, VAT-registered businesses using MTD will face increased penalties for late payments, with the rate rising from 2% to 3%. These reforms will extend to self-employed individuals and landlords earning over £50,000 from April 2026, and to those earning over £20,000 from April 2028.

The penalties will escalate based on the number of days overdue:

  • 3% penalty after 15 days
  • An additional 3% after 30 days
  • An additional 10% annualised charge beyond 31 days

This move is part of HMRC’s strategy to encourage timely tax payments and improve overall compliance.

Enhanced Tax Debt Collection

To support enforcement, the government will invest £80 million to expand HMRC’s debt collection capabilities. This includes the hiring of 600 new debt management staff and the use of third-party debt collection agencies. The initiative is expected to recover up to £1.3 billion over five years.

Crackdown on Tax Avoidance Schemes

HMRC also announced a new consultation on tackling the promoters of tax avoidance schemes. Measures under consideration include:

  • Introduction of a Universal Stop Notice
  • Expansion of the Disclosure of Tax Avoidance Schemes (DOTAS) regime
  • Stronger sanctions and enforcement against non-compliant tax advisers

These changes aim to protect taxpayers and ensure fair treatment across the tax system.

Reform of ISA Rules

The government is planning reforms to Individual Savings Accounts (ISAs) to incentivise greater participation in the equity markets by retail investors. The aim is to shift public savings behaviour from low-yield cash ISAs toward investment-based options. Full details are expected later in the year.