Tax Simplification, Administration and Reform
(Limited Text - Ministerial Extracts only)
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The Exchequer Secretary to the Treasury (James Murray)
At the autumn Budget 2024 and the spring statement 2025, the Government committed to bringing forward a package of measures in spring 2025 aimed at simplifying the tax and customs system to help deliver the plan for change. Today, the Government deliver that commitment with a package of 26 measures.
In addition, the Government are setting out two further administrative measures designed to strengthen the integrity of the tax and customs system, as well as a package of 11 measures that reform the tax system, ensuring that it continues to be fit for the modern world.
This includes new plans to reduce bureaucracy and increase efficiency at His Majesty’s Revenue and Customs to deliver the Government’s ambition to become a more productive, agile and effective state.
Simplification
Measures announced today will support economic growth by reducing burdens on employers and small businesses, modernising HMRC systems and processes to simplify the experience for individuals and traders, and simplifying HMRC guidance and communications.
The Government have engaged widely with stakeholders, including representative bodies, business organisations, the border industry and small businesses, and are implementing five ideas submitted by the Administrative Burdens Advisory Board as their priorities for simplification.
The Government will continue to work with stakeholders to identify further measures and priorities for simplifying the tax and customs administration system.
These measures will collectively reduce administrative burdens so that businesses and individual taxpayers spend less time on tax and customs administration and more time adding value to the economy.
Measures being announced today that reduce burdens on businesses, employers, and employees include:
Capital goods scheme simplification: To support small businesses, secondary legislation will be laid at a later date to remove computers from the assets covered by the scheme, and increase the capital expenditure value of land, buildings and civil engineering work, currently set at £250,000—exclusive of VAT—to £600,000.
Spirit drinks verification scheme simplification: At the autumn Budget, the Government announced their commitment to support the UK spirits industry by, among other measures, investing up to £5 million into HMRC’s spirit drinks verification scheme. The Government have decided to use this funding to modernise HMRC’s IT system and introduce a simpler flat fee model, significantly reducing the fees paid by operators to £250 per facility.
Mandating the payrolling of benefits in kind: As recommended by the Administrative Burdens Advisory Board, the Institute of Chartered Accountants of England and Wales, and the Employment and Payroll Group, the Government have announced a delay to the introduction of mandatory reporting and paying of income tax and class 1A national insurance contributions (NICs) on benefits in kind via payroll software—“Mandatory Payrolling.”
Mandatory Payrolling will be introduced from April 2027 instead of April 2026, to reduce the burden on businesses by giving them more time to prepare for changes. HMRC will continue to engage on design and delivery issues to ensure minimum disruption to employers.
These steps to reduce burdens on employers build on the 28 January 2025 announcement that the Government will not be taking forward the draft Income Tax (Pay As You Earn) (Amendment) Regulations 2025, initiated by the previous Government. This means employers will no longer have to provide more detailed employee hours data to HMRC from April 2026.
Additionally, today the Government have set out further measures to modernise HMRC systems and processes to simplify the customer experience, including:
Cultural gift scheme: The Government are announcing their intention to introduce legislation at the next Finance Bill to reform the scheme by removing the restriction on jointly owned objects and allowing tax credits to be used more flexibly. This will simplify the scheme by making it more accessible and improve take-up and will come into effect from April 2026.
Income Tax Self-Assessment (ITSA) criteria review: the Government confirmed their intention to raise the ITSA reporting threshold for trading income and align it with new ITSA reporting thresholds for property and “other taxable” income, at £3,000 gross each. This will remove the requirement for up to 300,000 taxpayers to file a self-assessment return. These changes will be implemented within this Parliament.
Reviewing National Insurance Contributions (NICs) Annual Maximum refunds process: A review of the process for refunding national insurance contributions under the annual maximum rules, to make it easier and faster for customers to access the refunds they are entitled to.
Voluntary NICs: enhancing “Check Your State Pension” forecast service: The Government also intend to further enhance the “Check Your State Pension” forecast service, which supports people who want to pay voluntary national insurance contributions to fill gaps in their national insurance record.
These measures build on the Government’s announcement at the spring statement 2025 that, from summer 2025, employed individuals who become liable to the high-income child benefit charge will be able to opt to pay HICBC directly through PAYE, without the need to register for self-assessment.
Simplifying HMRC guidance and communications is crucial to helping taxpayers get their tax right first time and reducing the worry and stress of managing their tax affairs. Therefore, the Government are announcing five measures to improve HMRC guidance and communications, including:
Clarifying self-assessment registration obligations: As recommended by tax professionals, HMRC will simplify guidance on self-assessment registration obligations to ensure clarity on when individuals must register for self-assessment.
Simpler communication and AI solutions: HMRC is working with external stakeholders to simplify HMRC guidance and communications by:
Working with the Administrative Burdens Advisory Board and others to simplify the language used in HMRC letters, making them more accessible and easier to read.
Collaborating with third parties and the Government Digital Service to investigate how businesses could leverage HMRC’s gov.uk guidance in their own AI-powered products and services. This could make it easier for taxpayers to get the information they need with the help of the latest AI solutions, reducing the need to contact HMRC, and access a more personalised experience to meet their needs.
The Government are also announcing a package of measures that simplify customs processes, reduce burdens and improve customer experience, while ensuring that we place targeted and appropriate control on movements. This includes:
Improvements to temporary admission: A package of simplifications and improvements to temporary admission, which relieves import duties on temporary imports.
Customs digitalisation: Announcing the details of Government pilots progressing trade and customs digitalisation, including a technical pilot with US Customs and Border Protection to test methods to speed up processes for trade for UK and US businesses.
Transit improvements: An informal stakeholder engagement exercise on potential improvements to modernise the transit process.
Authorisation by Declaration: Increasing how often AbD—authorisation by declaration—can be used from three times to 10 times per 12 months. AbD allows importers to use certain special procedures to suspend or relieve duties without getting an authorisation from HMRC beforehand.
Post and parcel exports consultation: A summary of responses to the customs treatment of post and parcel exports consultation. This includes a new authorisation scheme for ETOE—extraterritorial office of exchange—operators and sites to ensure that they operate with appropriate security standards. It also announces plans to conduct a further review of the export and transhipment memoranda of understanding, with the aim of clarifying existing rules and ensuring consistency and alignment with other comparable facilitations.
These measures are part of our ambition to embed innovation in customs processes and systems to support digitalised trade and supply chains. The Government are committed to continuing to work closely with industry to deliver on our ambitions and further improve our customs system.
Tax Administration
The Government are introducing administrative measures as part of this package of tax and customs policies.
This includes legislative amendments to ensure that all border locations are responsible for funding and operating their own customs infrastructure.
Reform
The Government have announced a package of measures that help to reform the tax system, ensuring that it continues to be fit for the modern world.
New proposals are being published for consultation, including on a single remote gambling duty, as committed to at the autumn Budget 2024, and on the VAT treatment of business donations of goods to charity. The Government are also consulting on proposals to reform the soft drinks industry levy in order to strengthen incentives to reduce sugar in soft drinks, proposals to reform landfill tax, and are exploring the merits of reform to online marketplace liability for VAT.
In addition, the Government will outline next steps on reform work already under way, including on the modernisation of the stamp taxes on shares framework and the response to the technical consultation on vaping duty.
The Government are committed to modernising HMRC to become a digital-first organisation. The Government are announcing today that HMRC will reduce paper post sent, saving £50 million per year by 2028-29, while maintaining paper post provision for critical correspondence and for the digitally excluded. The Government will do this by investing in digital services to send and receive taxpayer information and will bring forward legislation to support a digital-first approach.
The Government are committed to improving value for money in the system of tax administration, and so will be reducing the HMRC estate in central London by 25%. HMRC is already a national organisation and by 2030, 85% of HMRC staff will be based outside of London. Moving roles out of London, in line with the Government’s wider “Places for Growth” initiative will ensure that the civil service is closer to the communities it serves.
Ahead of their review of all arm’s length bodies, the Government are confirming that they will bring the functions of the Valuation Office Agency, an executive agency of HMRC, within HMRC by the end of this financial year. Moving the VOA’s functions into HMRC will strengthen direct accountability to Ministers, helping to improve the experience of taxpayers and businesses and support the delivery of the Government’s commitments to reform business rates and modernise the tax system. This move will support the Government to deliver change more quickly and effectively, by combining the expertise and experience of both organisations in policy, valuations and programme delivery. It will also drive efficiencies in the administration of the tax system, resulting in between 5% and 10% in additional savings in VOA administrative costs by 2028-29.
The full list of publications and announcements can be found at: https://www.gov.uk/government/collections/tax-update-spring-2025-simplification-administration-and-reform
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