Budget 2025 – Hidden Details

Here is a summary of some of the smaller, but impactful, measures announced in the UK Budget 2025.

💻 Digital & Compliance Changes for Businesses

The government is continuing its drive towards digitisation, which includes the significant introduction of mandatory e-invoicing.

• Mandatory E-Invoicing:
  • The Budget confirmed that the UK will introduce mandatory e-invoicing for all Business-to-Business (B2B) and Business-to-Government (B2G) VAT invoices from April 2029.
  • Impact: This means businesses will need to be able to issue and exchange invoices in a structured electronic format (not just a PDF). This move aims to improve efficiency, reduce errors, and combat VAT fraud, but it will require significant changes to accounting and invoicing software and processes over the next few years.
  • Next Steps: The government plans to start detailed stakeholder engagement in January 2026 and publish a roadmap for implementation at the Budget 2026.
• Digital Prompts for Tax Filers:
  • HMRC is investing in new technology to provide real-time digital prompts within tax filing software.
  • This will apply to VAT filing software from April 2027 and Corporation Tax filing software from April 2028, designed to "nudge" taxpayers if their returns appear incomplete or late.
• Making Tax Digital (MTD) for Income Tax:
  • While not a brand-new announcement, the looming deadline for MTD for Income Tax Self Assessment (ITSA) for sole traders and landlords with income over £50,000 (from April 2026) was reiterated. The Budget re-emphasised the need for businesses to prepare for this shift to digital record-keeping and quarterly submissions.

💰 Specific Tax-Raising Measures

Beyond the main tax freezes, several specific reliefs and exemptions are being curtailed or reformed to raise revenue.

• Salary Sacrifice Pension Cap:
  • From April 2029, there will be a £2,000 cap on the amount of pension contributions that can be put in place via salary sacrifice and shielded from employer and employee National Insurance Contributions (NICs).
  • Impact: This targets high earners who benefit significantly from the current unlimited NICs relief on salary sacrifice, raising substantial revenue for the Exchequer.
• Employee Ownership Trust (EOT) CGT Relief:
  • The Capital Gains Tax (CGT) relief for Employee Ownership Trusts is being restricted, with the 100% relief expected to be reduced to 50%.
• Changes to Property/Savings/Dividend Tax Rates:
  • To compensate for the lack of National Insurance on these types of income, the government is increasing the tax rates on property income, savings income, and dividends by 2 percentage points across the basic, higher, and additional rates, taking effect from April 2026 (Dividends) and April 2027 (Property and Savings).

🚗 Other Notable Adjustments

• Electric Vehicle (EV) Mileage Duty:
  • As anticipated, a new mileage-based charge will be introduced for electric and plug-in hybrid vehicles to replace lost Fuel Duty revenue, set at 3p per mile for EVs and 1.5p per mile for plug-in hybrids.
• Restriction of Motability Reliefs:
  • Taxpayer subsidies for those using disability benefits for Motability vehicles are being removed, including imposing VAT on payments for higher-value cars and ending relief from Insurance Premium Tax.

These less-publicised measures will collectively necessitate significant adjustments for financial departments, particularly those related to IT systems, compliance, and employee benefits.