Spring Statement 2025 Preview: Payroll Compliance & Tax Changes

Opinion: Peter Smallwood OBE – Guild Public Affairs

Next Wednesday, 26th March 2025, Chancellor Rachel Reeves will deliver her first Spring Statement, resetting the UK’s economic direction. At The Guild, we will be paying particular attention to its significance for clients and industry partners engaged in payroll management, umbrella companies, employment compliance, and, of course, taxation—all of which will shape the direction of The Guild Group in the year ahead.

Can she stick to her fiscal rules?

Most commentators agree that the current state of the economy is challenging. The Organisation for Economic Co-operation and Development (OECD) has revised the UK’s GDP growth estimate for 2025 down to 1.4%—a 0.3 percentage point reduction from prior calculations—citing underwhelming economic performance. Additionally, the UK economy contracted by 0.1% in January 2025, primarily due to a 0.9% decline in the production sector, while services experienced modest growth of 0.1% and construction activity decreased by 0.2%.

What could Rachel do?

The Spring Statement may cover a number of policy areas in this complex political environment:

1. Payroll Compliance Changes – The government is expected to tighten rules on payroll compliance and umbrella companies, shifting responsibility for unpaid NICs contributions further up the supply chain. This could result in higher costs and increased administrative burdens for businesses and employment agencies.
2. Stricter Penalties for Incorrect Payroll – Businesses found using non-compliant payroll structures may face harsher fines. This reflects the government’s determination to crack down on tax evasion. While such measures are often included in employment rights legislation, they could also be introduced in the Spring Statement.
3. Taxation Policies – There is speculation that the threshold for Individual Savings Accounts (ISAs) could be significantly lowered, potentially impacting low-income savers. This move is reportedly part of a wider plan to shift focus from cash savings to business investment.

Implications for Payroll and Umbrella Companies

These expected changes will have multiple impacts, particularly in driving up payroll costs. Increases in employer NICs and the National Living Wage will be key considerations for businesses deciding whether to make additional hires.

Umbrella companies and payroll providers must stay ahead of regulatory changes. The crackdown on non-compliance will be a hammer blow to those offering low-cost deals at the expense of proper regulation. Compliance will no longer be optional—it will be essential. Businesses will also need to reassess financial strategies to absorb these rising costs while ensuring they remain compliant. With increased HMRC scrutiny already underway, efficiency and cost management will become more crucial than ever.

How is The Guild preparing?

The Spring Statement 2025 could be a wake-up call for many businesses to get serious about well-managed and compliant payroll and taxation. The pressures are mounting, and the government is clearly ramping up enforcement.

At The Guild, we stand ready to adapt to these changes and provide the safe haven that many will be seeking in challenging times.

If you want to get ahead of the game, contact us today.