Spring Statement leaves IR35 alone as HMRC lines up a £1bn compliance push
Rachel Reeves ruled out fresh tax rises on 26 March, but a hardened HMRC enforcement drive and a lower Making Tax Digital threshold shifted the pressure on contractors from rates to compliance.
Chancellor Rachel Reeves used her Spring Statement on 26 March 2025 to rule out fresh tax rises, but the fiscal update still carried real consequences for the UK's IT contractors: a hardened HMRC compliance programme, a crackdown on abusive insolvencies, and a lower entry point for Making Tax Digital that will eventually pull hundreds of thousands more sole traders into quarterly reporting.
No tax rises against a weaker economy
The statement was framed as a spending and fiscal-discipline exercise rather than a tax event. The Office for Budget Responsibility halved its 2025 growth forecast from 2% to 1%, while nudging up its projections for later years to 1.9% in 2026 and 1.8% in 2027. Reeves confirmed there would be no new tax increases, leaning instead on welfare cuts worth around £4.8 billion to rebuild fiscal headroom. Amanda Tickel, head of tax and trade policy at Deloitte UK, said: "The Spring Statement held true to the commitment of no new tax rises." For contractors already absorbing April's rise in employer National Insurance, the absence of further rate changes offered a measure of stability.
IR35 ignored, compliance hardened
The off-payroll working rules, known as IR35, went unmentioned in the speech, disappointing a sector that has long pressed for reform. What the statement did deliver was enforcement. The Treasury set out measures intended to raise more than £1 billion in additional gross tax revenue a year by 2029-30 as part of its drive to close the tax gap. HMRC will recruit 500 more compliance officers on top of the 5,000 announced at the Autumn Budget, backed by around £100 million of investment, and add roughly 400 staff to pursue wealthy offshore non-compliance. A new reward scheme for informants, paying a percentage of the tax recovered, is due to launch later in 2025. Separately, HMRC, Companies House and the Insolvency Service set out a joint plan to tackle "phoenixism" - directors who liquidate companies to escape tax and debts before starting again - aiming to double the tax protected to £250 million by 2026-27, partly by making more directors personally liable.
What it meant for contractors
The clearest new obligation was the extension of Making Tax Digital for Income Tax. The qualifying-income threshold, already due to fall to £50,000 from April 2026 and £30,000 from April 2027, will drop again to £20,000 from April 2028, bringing an estimated further 900,000 sole traders and landlords into a regime of digital record-keeping and quarterly updates filed through approved software. The Association of Independent Professionals and the Self-Employed said it was "concerned that a good number of this last cohort to be mandated will be unrepresented by an accountant and will likely find the quarterly reporting requirement of MTD burdensome," and urged ministers to hold the threshold at £30,000. For contractors, the direction of travel had shifted from headline rates to administration and enforcement: those trading through limited companies gained short-term certainty on IR35, while sole traders faced a firm 2028 deadline and a growing expectation that HMRC would police the supply chain more aggressively. Reeves had promised no new taxes; she had not promised an easier ride.