Spring Statement 2025: Ten devils in the detail contractors must face

Spring Statement 2025 affects contractors in potentially numerous ways – with ten devils in the detail, but it didn’t live up to its billing.

How are Spring Statement experts who didn’t respond responding?

Rachel Reeves’s second fiscal statement was such a damp squib that:

• a technical tax officer told ContractorUK they were too “underwhelmed” to comment.
• a senior employment law partner asked ContractorUK, “Have I missed something?”
• an agency boss told ContractorUK that the chancellor’s speech sent them into a “dream” of IR35 reform being repealed.

How long was Spring Statement 2025?

The extremely short duration of Reeves’s statement – just over 33 minutes – is partly behind the feeling of underwhelm.

For context, the longest UK Budget speeches have been over four hours, and the shortest (until now) was 45 minutes (Disraeli, 1867).

Why was Spring Statement 2025 so short?

Yesterday, Reeves reiterated to MPs Labour’s commitment to “deliver just one major fiscal event a year.”

Spring Statement 2025 is the first “Spring Forecast” -- as officials are trying to rebrand it, to seemingly ‘go light’ to help achieve that commitment.   

Further explaining its brevity, Spring Statement 2025 “does not contain any further tax increases,” the chancellor said in her speech. 

Did prior Spring Statements really pop then?

Spring Budgets were weightier in their announcements than Spring Statements.

But contractors have come to expect (March) Spring Statements to hold significant changes to limited and umbrella company working.

For example, prior Spring Statements saw National Insurance reforms, VAT registration threshold changes, tax cuts and a new ISA.

What are ten devils in the detail at Spring Statement 2025?

1. First devil: employment costs will still soar from April 6th

A provider of ISAs, MoneyBox, last night emailed its account holders with a summary of Spring Statement 2025.

One of the summary’s sections is about what Spring Statement does not change; what the chancellor’s statement does not affect.

And it represented one of the summary’s longest sections.

‘Less about the new, more about the reaffirming’

Speaking last night, the director of accountancy services at Brookson, Patrick Gribben, offered the following explanation to ContractorUK:

“Rachel Reeves’ Spring Statement 2025 was less about announcing anything new, and more concerned with reaffirming the forecasted impact of policy shifts already announced.”

For example, under Labour, the National Minimum Wage is already set to increase to £12.21 an hour.

The threshold at which employer NICs become payable to HMRC is similarly set to become costlier -- by falling to £5,000.

And the third employment cost hike is that employer NIC is already due to rise from 13.8% to 15%, said Gribben, a chartered accountant.

‘Spring Statement 2025 supports employment costs getting higher’

Problematically for small companies, Reeves yesterday ducked calls to U-turn the latter two National Insurance measures.

Instead, all three measures will hike hirers’ costs from April 6th 2025.

“These three measures [which Spring Statement 2025 kept as incoming] make it more costly for small businesses to employ people,” says Brookson’s Mr Gribben.

“The effect of the three also makes it more important to be aware of the Employment Allowance, which was increased [at Autumn Budget 2024] to allow businesses to offset up to £10,500 of employer NICs per year.”

‘Chancellor offering little relief to UK contracting sector’

Spring Statement 2025 for firms, agencies, and umbrella companies “offers little relief,” says Number Mill founder Louise Rayner.

One-person companies aren’t eligible for the Employment Allowance.

It’s a blow to micro-businesses that Rayner seems to have factored into her ‘little relief’ verdict of Reeves’ statement.

“Despite calls from business leaders, she has not backtracked on the upcoming rise in Employer’s National Insurance Contributions,” Rayner said of Reeves.

“[As a result] employment costs will increase from April 6th 2025.

“This is a major blow to businesses already facing tight margins, wage inflation, and a cooling job market.”

2. Second devil: No change on IR35 / OPW rules

On Spring Statement’s eve, IPSE revealed that 43% of PSC contractors have suffered a decline in demand since October 2024’s Autumn Budget.

Sixty-seven per cent of PSCs feel less confident about securing outside IR35 roles over the next 12 months, the group added.

And 57% say no Status Determination Statement has been issued by their client, seemingly at odds with the client’s legal obligations.

‘IR35, the big money-spinner for HMRC’

Spring Statement 2025 yesterday made no mention of IR35 or the off-payroll working rules.

Much to IPSE’s disappointment, the three IR35 frameworks (of 2000, 2017 and 2021) therefore remain in full force.

IPSE’s policy director Andy Chamberlain told ContractorUK: “The IR35 rules may be a big money-spinner for the taxman.

“But the clients, contractors and recruiters who are having to deal with these rules can see first-hand just how disruptive and distortive they are to hiring and productivity.

“When we have a government that is staking its reputation on strengthening the workforce and growing our economy, one has to wonder how much longer it can allow this situation to go on for.”

‘Single Worker Status vanished off Labour’s radar’

A status advisory expected Spring Statement 2025 to say nothing on the OPW rules, given HMRC only just said they were operating well.

“The absence from chancellor Reeves of anything IR35 or off-payroll working…is not surprising given HMRC’s recent ‘research’ singing the usual tune of everything is working perfectly,” says the advisory, Bauer & Cottrell.

“But for contractors and engagers [who have been promised an overhaul of CEST] grappling daily with these rules, [the omission will feel like a slap in the face], especially as Single Worker Status appears to have vanished from Labour’s radar completely.”

Speaking yesterday to ContractorUK, Bauer & Cottrell’s Charlie Hemsworth said Spring Statement 2025 ignoring IR35 would “feel like a missed opportunity” to numerous contractors, agencies, and end-clients.

‘Contractor industry just got left to get on with more of the same’

Bowers Partnership is one such contractor recruitment agency.

Founder Natalie Bowers told ContractorUK: “Spring Statement 2025 has just left the contract staffing sector to get on with more of the same – and that’s true on the IR35 front.

“The government should have but didn’t hand the reins back to contractors as those best-placed to gauge their IR35 status.

“It means clients and agencies are going to still be the tax status gatekeepers in 2025-26.”

3. Third devil: macro gloom

Found not just in the detail of Spring Statement 2025 but in the chancellor’s speech too are updated figures for the UK economy.

Chart Accountancy boss Teodora Dimitrova yesterday told ContractorUK:

“Today, chancellor Rachel Reeves delivered a Spring Statement…[amid] significant economic challenges.

“[For example] the Office for Budget Responsibility has halved the UK’s 2025 growth forecast from 2% to 1%.

“This reduction hints at a weakened economy going forward -- with all the [unwanted] implications that has for [our] clients.”

‘Uninspiringly, it’s a case of as you were for many’

Alan Lowdell, former finance manager at Gattaca, sounds far from impressed at the former BoE staffer’s financial report.

“The chancellor of the exchequer remained true to her principle of sticking to one fiscal event per year and so for many, it’s ‘as you were’ following Spring Statement.

“Unfortunately though, Rachel Reeves failed to deliver anything…that could be described as inspiring.”

‘Blame, tinker, and choice at Autumn Budget 2025’

The ex-money manager for the staffing giant continued in a statement to ContractorUK:

“Her approach [during her speech] was to blame the previous government, and then tinker at the edges of government spending rather than grasp the nettle and introduce pro-business measures.

“Given the OBR’s halving of the growth forecast from 2% to 1% for this year, it is extraordinary that the chancellor hasn’t sought to address this now.

“Whether Reeves does this at Autumn Budget 2025 is another question entirely.

“But with formidable spending obligations and a firmly stated commitment to obey fiscal rules, unless there is a strong summer of economic growth, the government is likely to face a choice between further spending cuts and tax rises.”

4. Fourth devil: unemployment gloom

The OBR says UK unemployment will “peak at 4.5 per cent” – 1.6 million people – in 2025.

“OBR also says that unemployment will be rising this year and next year and the year after,” shadow chancellor Mel Stride said in the Commons. “And in fact across the forecast period, it will not decline at all.”

‘Crossroads’

The Recruitment & Employment Confederation says it is now at a “crossroads” with the government on employment.

REC’s chief executive Neil Carberry said last night: “The upcoming rise in Employer’s National Insurance, anti-business rhetoric from some parts of government, and worries about impractical new employment regulation, are all acting as anchors on business confidence to invest.”

‘Unconcerned at unemployment rising’

Number Mill’s Ms Rayner finds it curious that the chancellor made “no mention of rising unemployment”.

“As job vacancies fall,” Rayner says, “the government appears unconcerned about rising unemployment and its impact on the economy.”

5. Fifth devil: agency worker spend just got its card marked

In her speech, Reeves said the health secretary, Wes Streeting MP, is “driving forward vital reforms to increase NHS productivity.”

She also said Mr Streeting is “bearing down on costly agency spend,” to “save money so that we can improve patient care.”

‘Costly recruitment agencies’

The REC’s Mr Carberry condemned: “The narrative about costly agencies is back to front.

“NHS trusts are struggling to find contingent staff due to a nine-year freeze in most pay rates for affordable, on-framework agency work.

“This has driven trusts to expensive provisions that could be avoided by working in partnership with agencies, unions and trusts to design a system that really works.

“[And] with the National Insurance rise next month, agencies are forced to absorb the cost due to the government's refusal to pay its own tax increase.”

‘NHS recruitment agencies unfairly blamed and belittled by Reeves’

Carberry said the chancellor “unfairly blamed and belittled” agencies in her House of Commons speech.

“[Agencies] continue to provide vital 21st-century staffing solutions at a time when the NHS cannot fill its vacancies,” he says.

“Agencies want to remain an integral part of the NHS as respected partners, not as punchbags. Without them, it is patients that will lose out.”

6. Sixth devil: New definition of ‘employment business’ to enable umbrella company regulation

Janet De-Havilland of Pendragon Advisory advises contractors’ partners to “take a closer look” at Employment Rights Bill Clause 34.

It amends the definition of an “employment business” in the Employment Agencies Act, solely so umbrella companies can be brought into regulatory scope.

‘Employment Rights Bill Clause 34 focuses on behaviour’

The new definition serves to permit umbrellas’ regulation under the Conduct Regs, while bringing brollies within both the EAA and the remit of the Fair Work Agency too.

But De-Havilland says because ERB Clause 34 “focuses on behaviour” like payment handling and worker supply, rather than corporate structure, companies that aren’t straight umbrellas risk being unintentionally affected.

‘Employment business’

As to the old definition of an “employment business” which is now being replaced, contractor law firm Egos cited it to ContractorUK as:

"‘Employment business’ means the business - whether or not carried on with a view to profit and whether or not carried on in conjunction with any other business - of supplying persons in the employment of the person carrying on the business, to act for, and under the control of, other persons in any capacity.”

‘Employer arrangements’

Much longer, the new definition of “employment business” (with the effect of capturing umbrellas) was last night cited by Egos legal consultant Roger Sinclair:

“‘Employment business’ means the business - whether or not carried on with a view to profit and whether or not carried on in conjunction with any other business - of participating in employment arrangements.

“And ‘employment arrangements’ means arrangements under which persons who are, or are intended to be, in the employment of a person are, or are intended to be, supplied to act for, and under the control of, another person in any capacity.”

Sinclair went on to cite four activities that have been inserted into the ERB as constituting “participating in employment arrangements.”

‘Sneaky way to define umbrella companies’

Pendragon Advisory, where De-Haviland is CEO, says: “The government has long promised to define what an ‘umbrella company’ is.

“But many wondered how they'd accomplish this given the lack of legal definition for over 20 years.

“Well, blink and you might have missed it…[as we] believe Clause 34 of the Employment [Rights] Bill amendments contains the definition we've been waiting for – albeit in a rather sneaky way.”

‘Labour wants to abolish umbrella companies, but won’t just say so’

Rob Sharp, chief executive of Orca Pay Group is very unsettled.

“I’ve said for the past 18 months that Labour wants to abolish umbrella companies, without having to actually say ‘we want to abolish umbrella companies,’” Mr Sharp told ContractorUK yesterday.

“And this [Clause 34] looks like being a huge part in achieving that.

“Whatever the government intend to do, I believe this is going to be an absolute disaster, as they have no idea how badly they will open Pandora's box if they carry on going down the current path”.

De-Havilland says the main issue is the “employment arrangements” wording as, under it, she says Professional Employment Organisations (PEOs) and Employers Of Record (EORs) will be regulated as well.

7. Seventh devil: ‘Deemed employer’ incoming to umbrella-agency contractor supply chains

Spring Statement 2025 offers no let up to ‘deemed employment,’ the government’s umbrella company tax non-compliance tool of choice.

“The April 6th 2026 [tax plan] for the umbrella sector continues”, Brookson’s Mr Gribben started.

“The potential plans for tax changes to shift PAYE and NICs responsibility from umbrella companies to recruitment agencies or, where no agency is involved, directly to the end-client, [stayed in place yesterday].”

‘The PAYE-NICs un-merry go-round continues’

Put another way, “nothing’s changed” on the umbrella company tax crackdown, says Bowers Partnership.

So recruitment agencies “are still sat on the same old PAYE-NICs ‘un-merry-go-round’” with umbrellas, says the firm’s Ms Bowers.

‘Payroll pirates’

Clarity Umbrella wanted a U-turn or deferral of the tax proposal, but it seems “we were expecting too much” of the chancellor.

Clarity’s Lucy Smith added: “The plan designed to try and remove ‘payroll pirates’ - aka tax avoidance schemes - from the marketplace would have been a great rethink.

“However, the £7.5bn they believe they will raise from reducing evasion by bringing in more HMRC compliance offers to hit these schemes, will soon fade into significance, as their decision [to shift the responsibility to account for PAYE] will invariably cost the government significantly more than this in the long-term.”

‘Put a hold on shifting PAYE liability’

The FCSA was also hoping for an intervention, which it says four new tax consultations would provide a valuable learning experience on.

Chief executive Chris Bryce says: “It does rather strike me that as there's now at least four more consultations in the offing, putting a hold on shifting PAYE liability from payment intermediaries to recruiters, would give the government time to learn from the industry how best to tackle the issue.”

8. Eighth devil: Labour’s big lean on HMRC to raise revenue

As reported yesterday by ContractorUK, four new HMRC consultations at Spring Statement 2025 represent a significant lean from Labour on compliance to raise revenue.

The two most relevant to contractors are “Enhancing HMRC's ability to tackle tax advisers facilitating non-compliance” and “Closing in on promoters of tax avoidance.”

‘Thumb-twiddling HMRC could have crushed avoidance schemes’

Compliance organisation Professional Passport reflected on the pair (open until May 7th and June 18th, respectively) through gritted teeth:

“While these two consultations announced today are well-intended, the answer to the perpetual question of how to close in on the promoters of tax avoidance is easy – tap into your data HMRC.  

“HMRC is sitting on a goldmine of data that could have crushed tax avoidance schemes years ago, yet they've chosen to twiddle their thumbs.”

‘Taxman failed on intermediary reports and payroll data’

Professional Passport’s CEO Crawford Temple continued: “By failing to cross-reference intermediary reports and real-time payroll data, HMRC has effectively created a playground for tax avoiders.

“Their reactive approach has cost workers millions and the Treasury billions in lost revenue. Sluggish and slow enforcement mechanisms have transformed what could have been a precise surgical intervention into a widespread compliance crisis and the economy is suffering as a result.”

‘Under HMRC non-compliant umbrella companies have flourished’

Temple says “for years” HMRC has merely “watched” non-compliant umbrella companies “flourish” while opening consultations like the latest four.

“Every moment of hesitation [by HMRC] is an invitation for tax dodgers to thrive,” he says. “The time for analysis is over – the time for action is now.”

At Spring Statement chapter 2.25, HMRC is named with Companies House and the Insolvency Services as co-authors of an incoming plan to “tackle those using contrived insolvencies to evade tax and write off debts owed to others.”

‘Tackle phoenixism’

The Treasury says that to ‘tackle phoenixism’ the use of upfront payment demands will be increased.

The aim is to make “more directors personally liable for company taxes,” while increasing the number of enforcement sanctions to “double the amount of tax protected to £250 million by 2026-27.”

9. Ninth devil: Making Tax Difficult for Droves

Losing out to Spring Statement’s almost 40 separate mentions of “HMRC” in the Treasury’s 48-page ‘Green Book,’ is “MTD” with eight mentions.

Nevertheless, the angst over Making Tax Digital changes from the chancellor is almost as palpable.

‘MTD income tax threshold falling to £20,000’

“The main concern we have for our clients is the threshold for Making Tax Digital for income tax will be reduced to £20,000 from April 2028,” Chart Accountancy’s Richard Grant told ContractorUK.

“And this is expected to bring a further 900,000 lower-income taxpayers into the [MTD] regime. This will include landlords and it appears that this threshold may even be lowered in the future.”

‘Quarterly MTD reporting burdensome’

IPSE’s Andy Chamberlain confirmed: “Government has announced that from April 2028, sole traders and landlords with total income above £20,000 will have to comply with MTD.

“A good number of those businesses will be unrepresented by an accountant and may well find the quarterly reporting requirement burdensome and the software costs eating into their relatively low profits.”

‘Undue problems for lower-income businesses’

The Association of Independent Professionals and the Self-Employed (IPSE) says the £30k threshold already in place on MTD for 2027 should be extended.

And the association adds that the threshold shouldn’t be lowered “until it is certain [to the government that] MTD doesn’t cause undue problems for lower-income businesses.”

‘HMRC’s late payment penalties for MTD joiners to increase’

However, in another MTD announcement (at chapter 3.19), Spring Statement 2025 says late payment penalties for VAT taxpayers and income tax self-assessment taxpayers as they join MTD, from April 2025 onwards, will be increased.

The new rates will be 3% of the tax outstanding where tax is overdue by 15 days, plus 3% where tax is overdue by 30 days, plus 10% per annum where tax is overdue by 31 days or more.

10. Tenth devil: Taxing tax onslaught

“Tax enforcement is ramping up,” accountant Rachel Harris, a director at striveX warned yesterday on LinkedIn.  

“More HMRC staff, stricter penalties, and MTD is expanding. If you don’t already have investigation insurance -- which is tax deductible -- now’s the time.”

‘Spring Statement 2025, the emergency Budget’

After Reeves was accused by her political opponents of unveiling an “emergency Budget,” tax and business advisory RSM confirmed where the chancellor is equipping HMRC.

“Today’s statement brings significant investments to enhance HMRC… [such as] investing £87m over the next five years to bolster partnerships with private sector debt collection agencies, aiming to recover more unpaid tax debts.

“[It’s in addition to a] £114 million investment to recruit an additional 600 debt management staff, ensuring better handling of tax debts.”

‘500 more HMRC compliance staff’

RSM’s tax partner Susan Ball continued: “[A further] £100 million [will be] allocated to hire 500 more compliance staff, enhancing HMRC's ability to enforce tax laws.

“[This is] as well as expanding its counter-fraud capability to increase the number of annual charging decisions for the most harmful fraud by 20%, compared to current levels and the HMRC staff assigned to tackling wealthy offshore non-compliance by around 400 people.”

‘Lower value tax debt automation’

Ball also warned that HMRC received the all-clear yesterday to resume “direct recovery” of tax debts from “those who can pay but choose not to, and explore automation for lower value debts.”

Even one of the tax authority’s former officials, Carolyn Walsh, sounds a bit concerned about the sheer amount of firepower being loaded into the Revenue.

‘Spring Statement 2025 spends big on HMRC compliance’

“I'm already talking to HMRC because many of these measures will only work if they get to the right people in advance,” she says.

“The government has used Spring Statement 2025 to provide a bigger proportion of spending on compliance activities.

“That means identifying tax avoidance in all its forms; closing schemes by issuing stop notices and publishing details in the promoters of tax avoidance scheme lists.

“And more positively, but to a lesser extent, it also means helping unwitting taxpayers - potentially contractors - to avoid tax avoidance schemes before they end up with a tax debt.”

‘Contractor sector's overhaul wish’

Bowers Partnership’s Natalie Bowers says she ended up with something else yesterday afternoon.

“If you’re wondering why, like me, you got a headache sometime after the chancellor got to her feet to deliver Spring Statement 2025, it’s probably because it was half an hour akin to watching the grass grow. Fingers crossed that next time the contractor sector gets the market overhaul it’s been waiting for – not a taxing tax onslaught. Wishful thinking perhaps.”