In a Spring Statement, which had promised no new tax rises, Chancellor Rachel Reeves set out ambitious plans on 26 March to position the UK as a ‘defence industrial superpower’ in an uncertain world. She said defence would be at the heart of the UK’s modern industrial strategy – creating a country that buys, makes and sells.
The Chancellor’s announcement provided no changes to the previously announced inheritance tax (IHT) reforms, despite ongoing concerns from business owners. Under the current proposals from the Autumn Budget, family businesses valued over £1 million will be subject to a 20% tax on death from April 2026. However, no draft legislation was released alongside the statement, leaving many with unanswered questions.
With just over a year until these changes take effect, business owners face a tight window to plan their succession strategies. While the recently published Trust consultation document offered some additional insight into the new IHT framework, many key details remain unclear. This lack of clarity makes it challenging for taxpayers to make informed decisions, and further guidance from the government would be welcomed.
In addition, it was confirmed that Making Tax Digital (MTD) for Income Tax will be extended to sole traders and landlords earning over £20,000 from April 2028, with some exemptions. However, a more immediate change is set to take effect in less than 12 months, when MTD will apply to sole traders and landlords earning over £50,000. Despite the approaching deadline, there is still significant uncertainty about how the system will operate. HMRC has much work to do to provide clear guidance to taxpayers and their advisors to ensure a smooth transition to digital reporting.
Defence Investment and Economic Strategy
Beyond tax, the Chancellor reinforced the Government’s ambition to position the UK as a ‘defence industrial superpower’ in response to global uncertainties. As part of this commitment, defence spending is set to increase to 2.5% of GDP, with an initial £2.2 billion investment in the next financial year. This funding aims to create skilled jobs and strengthen key defence manufacturing hubs such as Plymouth and Rosyth.
Additionally, the Government pledged that at least 10% of the Ministry of Defence’s budget will be allocated to advanced technology, including AI and drones. This investment is expected to drive production and innovation in key industrial centres, including Glasgow, Derby, and Newport.
With significant tax changes and industrial strategy shifts ahead, businesses and individuals alike will need to stay informed and prepare accordingly.
