Labour’s first budget reshapes tax landscape
In October, Chancellor Rachel Reeves delivered Labour’s first budget in 14 years. The £40 billion package of tax increases would lift taxation as a percentage of gross domestic product to a record 38.2 per cent.
The headline announcement saw employers’ National Insurance contributions rise to 15% from April 2025, with a reduction in the secondary threshold from £9,500 to £5,000. “The slashing of the secondary threshold is reckless. “Despite there being relief for the very smallest of businesses, this will represent a massive hike in tax for the majority of the UK’s SME sector,” said Derry Crowley, CEO of accounting advisers Xeinadin.
An increase in capital gains tax prompted concerns about eroding investment appetite, with the lower rates rising from 10% to 18% and the higher rate from 20% to 24%. “By chipping away at incentives, this approach may stifle the appetite for risk, dampening the flow of vital investment into UK businesses,” said Lisa Miles-Heal, CEO of Silverfin.
Reeves confirmed that the previous government’s proposed changes to the rules for expat taxpayers – known as the “non-dom” regime – will go ahead.The Labour Government has sweeping plans to impose inheritance tax (IHT) on the global assets of UK residents claiming overseas domicile, which may push many to relocate.
Tax goes digital
HMRC unveiled a two-phase rollout of Making Tax Digital (MTD) for income tax from April 2026.
Craig Ogilvie, Director of Making Tax Digital at HMRC, said the initiative would help reduce errors and support business growth. “MTD will help to reduce errors, which supports business productivity and growth across the UK. It will ensure customers have up-to-date information to help with business planning,” he said.
On the digital front, artificial intelligence (AI) revealed great potential to streamline routine tasks and free up accountants to focus on strategic work. “AI actually helps firms, specifically in today’s context where they are struggling to find new hires,” said Shelsea Adrian from Yooz during the IFA’s International Conference Online.
Anti-money laundering progress
The IFA’s latest anti-money laundering monitoring report showed improved compliance across key areas, though challenges remained around risk assessment. Of 123 reviews undertaken during 2023/24, 71% of firms demonstrated full or general compliance with money laundering regulations.
Julie Williams, IFA Board Chair, highlighted the organisation’s commitment to supporting members: “The IPA Group investment in IT infrastructure, coupled with the restructuring of the Professional Standards department, demonstrates our continued commitment to helping supervised firms maintain compliance with the money laundering regulations and tackle economic crime,” she said.
Skills gap
The skills shortage continued to challenge the accounting profession.Research revealed that 88% of finance and accounting employers had skills gaps in their business. And nearly one-third of accounting professionals indicated they lack the skills to effectively use AI tools. “Our Accounting Talent Index shows how the acute lack of accountants has emerged as a critical bottleneck, and its impact has been nothing short of severe,” said Vipul Sheth, Managing Director at Advancetrack.
To address this challenge, a new Digital Accounting and Finance Degree Apprenticeship was developed to equip graduates with technological skills. Jonathan Mills, Chair of the Accounting and Finance Manager Degree Apprenticeship Trailblazer Group, said: “Accounting students needed deeper learning and a broader range of skills.”
Australia-UK Free Trade Agreement
The implementation of the UK-Australia Free Trade Agreement opened new opportunities for accountants. William Bain, Head of Trade Policy at the British Chamber of Commerce, noted early positive signs: “Some companies have definitely benefitted from tariff free trade and customs facilitations to export goods to new Australian customers,” he said.
The coming year promises further transformation and developments in the profession. These include:
- The Institute of Financial Accountants’ (IFA) AI and emerging technologies conference online on 6 March 2025, exploring the practical applications of artificial intelligence in accounting.
- Further clarity on MTD for income tax implementation as the 2026 deadline approaches.
- The rollout of digital accounting and finance degree apprenticeships at universities across the country.
- Ongoing support from the IFA through regional networking events and CPD opportunities.
- Additional guidance on Labour’s tax reforms as implementation dates draw closer.
The profession faces both challenges and opportunities in 2025, from adapting to new tax regimes to embracing technological innovation. The IFA will continue supporting members through these changes with practical guidance, training and networking opportunities.
