Spring Statement 2025: Key Updates for Sole Traders and Small Businesses

Chancellor Rachel Reeves has delivered the latest Spring Statement, introducing several changes that will impact small businesses and sole traders across the UK. Here’s a breakdown of the key measures you need to know:

1. National Living Wage Increase

From April 2025, the National Living Wage will rise to £12.21 per hour—a 6.7% increase, which translates to an annual boost of around £1,400 for full-time workers. If you have employees, this means higher payroll costs, so it’s worth reviewing your budget ahead of time.

2. Employer National Insurance Contributions

A significant change is coming for businesses with employees. Employer National Insurance contributions will rise to 15% (up from 13.8%), and the threshold for paying it will drop from £9,100 to £5,000.

However, the Employment Allowance is increasing to £10,500, which means smaller businesses could pay little to no National Insurance. This is particularly beneficial for micro-businesses and sole traders hiring their first employees.

3. Capital Gains Tax (CGT) Adjustments

  • The higher rate of CGT will increase from 20% to 24%.

  • Business Asset Disposal Relief (for selling businesses) will rise from 10% to 14% in 2025 and then 18% in 2026.

If you’re planning to sell a business or assets, these changes could significantly impact your tax liability.

4. Business Rates Relief Changes

The 75% discount on business rates is set to expire in April 2025, to be replaced by a lower 40% discount (up to £110,000).

From 2026-27, the government plans to introduce permanently lower business rates for high-street shops, hospitality, and leisure businesses. This could help businesses in these sectors in the long run, but short-term costs may rise.

5. Inheritance Tax (IHT) Reforms

  • Business Property Relief and Agricultural Relief will now apply only to the first £1 million of assets.

  • Shares not listed on a recognized stock exchange will see Business Property Relief reduced from 100% to 50%.

This could affect family businesses and those planning to pass down assets, making tax planning even more crucial.

6. HMRC Crackdown on Tax Evasion

The government is ramping up efforts to recover £1 billion in unpaid taxes, increasing tax fraud prosecutions by 20%.

For sole traders and small business owners, ensuring accurate record-keeping and compliance with tax regulations is more important than ever.

What This Means for You

These budget changes could have a direct impact on your finances. If you’re a sole trader or small business owner, consider:
✅ Reviewing your payroll costs and pricing strategy.
✅ Exploring Employment Allowance benefits if you have staff.
✅ Planning for CGT changes if you intend to sell assets.
✅ Checking your eligibility for business rates relief.
✅ Ensuring tax compliance to avoid penalties.

It’s always a good idea to speak with a financial advisor to assess how these changes will affect your business. If you need payroll or bookkeeping support, get in touch—we’re here to help!

📩 Contact us today to stay ahead of these changes.

Claire Adams