Tax update Spring 2025 from HMRC

Exchequer Secretary to the Treasury James Murray has outlined a range of administration and simplification measures intended to help modernise the tax and customs system.

Jonathan Athow, Director General, Customer Strategy & Tax Design at HMRC says “Many of the measures will improve HMRC systems or reduce administrative burdens to provide a better experience for individuals and businesses, while others will simplify the way HMRC communicates with our customers”.

Below are the consultations open to your responses, as well as the changes being made, and HMRC’s explanation of how each should help.

Improving HMRC’s approach to dispute resolution 

Consulting: HMRC is inviting views on how it might resolve customer disputes earlier and more effectively. 

The consultation focuses on the ease of access and use of HMRC’s alternative dispute resolution and statutory review processes, and includes the potential to simplify the appeals process by aligning
its approach for direct and indirect taxes.  

The consultation is open for feedback until 7 July 2025.

Valuation Office Agency (VOA) to join HMRC 

Change: Functions of the VOA will be integrated with HMRC by April 2026.

Explanation: Moving the VOA’s functions into HMRC will help to improve the experience of customers and businesses and support the delivery of the government’s commitments to reform business rates and modernise the tax system.  

This move will deliver change more quickly and effectively, by combining the expertise and experience of both organisations in policy, valuations and programme delivery.  

Income Tax Self Assessment (ITSA) criteria review  

Change: The government intends to change ITSA income reporting thresholds within this parliament. This will change how customers can report income below the thresholds to HMRC. The £1,000 tax-free trading allowance remains the same, meaning the amount of tax due is unchanged.  

This change will align three ITSA reporting thresholds for income at £3,000 (gross) each:

• increasing the ITSA reporting threshold for gross trading income
  from £1,000 to £3,000
• increasing the reporting threshold for “other taxable income”
  from £2,500 to £3,000
• creating a single reporting threshold for property income at
  £3,000 gross (currently £2,500 profit or £10,000 gross income).

Explanation: Implementing this will mean up to 300,000 customers will no longer be required to file a tax return. The vast majority (98%) of these customers are individuals who receive small amounts of trading income.

HMRC also estimates that 90,000 customers will have no tax to pay and could withdraw from Self Assessment. Others will still have tax to pay but could also withdraw from Self Assessment and report their liability through a new simple online service.

More details, including a timeline for delivery, will be published in HMRC’s Transformation Roadmap later this year.

Mandating the payrolling of Benefits in Kind update

Change: HMRC has published an updated technical note which provides
more operational information on how employers can adapt to mandatory reporting of Income Tax and Class 1A NICs for most Benefits in Kind and taxable expenses. These changes have been pushed back, and will now apply from 6 April 2027 instead of April 2026 as previously announced.

Explanation: HMRC is extending the deadline to give employers more time to adapt.

Capital Goods Scheme Simplification 

Change: The government will bring forward legislation to simplify the VAT Capital Goods Scheme (CGS), reducing burdens for businesses by increasing the threshold for land, buildings and civil engineering work from £250,000 to £600,000 (exclusive of VAT) and also removing computers from CGS assets.

Explanation: Increasing the threshold to £600,000 will remove an estimated 105,000 commercial properties from being subject to the scheme. These changes will take effect at a later, unspecified date.

Transfer pricing

The government has published two consultations on international tax reform.

Reform of UK law in relation to transfer pricing, permanent establishment and Diverted Profits Tax, is a
technical consultation on draft legislation. The intention is to simplify and update some of the UK’s international tax rules and align them with the UK’s treaty obligations.

Transfer pricing: scope and documentation, is a policy consultation on two related proposals:

• To better define the UK tax base by removing the exemption from transfer pricing for medium-sized businesses, whilst retaining an exemption for small businesses.
• Introducing a requirement for multinationals to report information on cross-border related party transactions to HMRC through a new International Controlled Transactions Schedule. The ICTS is intended to facilitate better identification of transfer pricing risk and allow for more efficient, targeted compliance activity.

Both consultations are open for feedback until 7 July 2025.

AAT Comment offers news and opinion on the world of business and finance from the Association of Accounting Technicians.