What New Government Changes Could Mean for Your Business

From tax crackdowns to interest rates, here’s what’s changing — and how to stay ahead.

Running a business right now means navigating a lot of moving parts. New tax rules, changing insurance requirements, and rising costs are all in the mix — and government plans released in June 2025 are likely to affect many businesses over the next year.

Here’s a round-up of what’s changing and what it could mean for you.

HMRC Targets £7.5 Billion in Unpaid Tax

Compliance pressure is ramping up — especially for smaller businesses

The government has announced a push to raise an extra £7.5 billion in tax revenue by stepping up efforts to close the so-called “tax gap” — the difference between what HMRC expects to collect and what is actually paid.

Recent figures show that £46.8 billion went unpaid in 2023–24 — around 5.3% of all tax due. Small businesses are in the spotlight, accounting for 60% of this gap, with Corporation Tax making up a big chunk.

Top causes of the shortfall include:

• Failure to take reasonable care (31%)
• Errors (15%)
• Tax evasion (14%)

What’s Changing?

• The government will invest £1.7 billion over four years
• HMRC will add 5,500 new compliance officers and 2,400 debt management staff
• Expect more scrutiny, particularly for small businesses

Making Tax Digital Expands

A big part of the plan is the expansion of Making Tax Digital (MTD), with new rules on the way. From April 2026, MTD for Income Tax will apply to anyone earning over £50,000 from self-employment or property. By 2028, that threshold will fall to £20,000.

Under MTD, you’ll need to:

• Keep digital records of income and expenses
• Submit quarterly updates via HMRC-approved software
• File an annual final declaration

Now’s a great time to review your processes and check if you’re ready for the switch.

Employers’ Liability Insurance — Updated Guidance

A legal requirement if you employ staff — are you covered?

The Federation of Small Businesses (FSB) has updated its guidance on Employers’ Liability Insurance, offering a useful reminder that this isn’t just good practice — it’s a legal requirement.

You’ll likely need this insurance if you:

• Employ anyone — including part-time, casual, or temporary staff
• Use volunteers or apprentices in your business

It covers you if an employee is injured or becomes ill as a result of their work and you’re found legally responsible.

What to Know:

• Minimum cover is £5 million (most policies offer £10 million as standard)
• Fines can reach £2,500 per day if you’re not covered
• The insurance certificate must be displayed or accessible to staff — or it’s a £1,000 fine

Some very small businesses — like sole traders without employees — may be exempt, but most employers will need cover.

If your staffing setup has changed recently, it’s worth double-checking that your insurance still matches your needs.

Bank of England Holds Base Rate at 4.25%

Inflation is easing slightly, but the outlook remains uncertain

At its June review, the Bank of England’s Monetary Policy Committee (MPC) held the base rate steady at 4.25%. That wasn’t a surprise — but it’s still a key signal for businesses managing loans, savings, or costs.

What’s happening with inflation?

• Headline inflation dipped to 3.4% in May, down slightly from 3.5%
• But food inflation rose again, reaching 4.4% — the highest since February 2024
• Chocolate prices are up 17.7% year-on-year, largely due to poor cocoa harvests

Some economists believe employers may be passing on rising National Insurance costs in prices — but there are multiple pressures at play.

What this means for your business:

• Borrowing costs remain steady — but lenders could lower rates if cuts are expected
• Savings returns remain unchanged — it’s worth checking your interest rates
• Costs remain a concern, so planning conservatively for the rest of the year may be wise

The next rate review is set for 7 August 2025.

2025 Spending Review: Focus on Value and Efficiency

Tighter scrutiny on public spending could signal opportunity — and pressure

The Chancellor’s 2025 Spending Review set out how the government will allocate money across departments in the years ahead. While much of it focused on health and education, there were several takeaways for businesses too.

Key points:

• A “zero-based” budgeting approach: departments start from scratch, not last year’s budgets
• Cost pressures are rising across public services, with a bigger focus on productivity
• Capital investment is up in areas like housing, transport, AI, and science
• Infrastructure projects may be fast-tracked under a modernised evaluation approach

What this could mean for you:

If you work with or supply to the public sector, expect more emphasis on value for money. Pricing, delivery, and transparency will all be under closer scrutiny.

At the same time, there could be long-term opportunities in construction, AI, and tech if you’re positioned in the right sectors.

New Cybersecurity Guidance on Personal Data

Holding sensitive personal information? New advice on protecting it

The National Cyber Security Centre (NCSC) has released new guidance to help businesses better manage sensitive personal information (SPI).

While not legally defined, SPI generally refers to data that — if leaked — could put someone at higher risk of harm, prejudice, or harassment. Think personal characteristics, occupation, or health status.

The guidance includes:

• A risk-based approach to assessing your data
• Nine principles to help protect SPI, including:
• Limit access
• Separate SPI from routine data
• Avoid merging datasets that could reveal sensitive info

A breach of this type of data could mean fines, lawsuits, and reputational damage — especially for smaller firms. Now may be a good time to review your data policies and access controls.

Final Thoughts

Whether it’s tax compliance, insurance cover, or adapting to digital reporting, the underlying theme of all these changes is the same: more scrutiny, higher expectations, and a need for tighter control.

If you’d like help reviewing your current systems — whether it’s your accounting process, tax position, or compliance setup — we’re here to help you stay informed and prepared.

Get in Touch

Categories: Positive Accountant