How the Latest Tax Administration Measures Affect UK Businesses and Employers

On 28 April 2025, James Murray, Exchequer Secretary to the Treasury, announced a raft of UK tax administration and simplification measures through a Written Ministerial Statement. A total of 39 updates were introduced, many of which are designed to reduce compliance burdens on UK employers and small businesses, while also aiming to modernise HMRC systems.

Whether you’re a small business owner, employer, or finance professional, it’s important to stay informed about these tax reform updates and how they may affect your compliance responsibilities and operations. Below are five key highlights from the announcement:

1. Mandatory Payrolling of Benefits Delayed Until April 2027

One of the most impactful updates is the delay in the mandatory payrolling of benefits in kind to April 2027 (previously April 2026).

Payrolling benefits allows employers to report and tax employee benefits (like company cars or private medical insurance) through PAYE in real-time, instead of submitting end-of-year P11D forms. While currently voluntary, this system will become mandatory in 2027.

This HMRC payroll update gives businesses an extra year to prepare, and HMRC has committed to streamlining the process to make implementation easier for employers.

2. Simplification of the VAT Capital Goods Scheme

The VAT Capital Goods Scheme (CGS) requires businesses to adjust the VAT reclaimed on high-value assets if their use changes over time.

To simplify VAT compliance:

• Computers will be excluded from the CGS in upcoming legislation.
• The threshold for capital expenditure on land, buildings, and civil engineering works will increase to £600,000 (excl. VAT), up from £250,000.

These VAT changes for businesses will reduce unnecessary admin and bring welcome relief to companies investing in infrastructure.

3. Improvements to HMRC’s CEST Tool

HMRC has updated its Check Employment Status for Tax (CEST) digital tool to make it more accessible and user-friendly.

Please note: these are interface updates only. The underlying logic used to determine a worker’s employment status has not changed — and many still feel the tool’s decisions can be inaccurate.

If you’ve used the CEST tool and are unsure about the result, we can provide a professional assessment of your situation.

4. VAT Consultation on Business Donations to Charity

The government is launching a consultation on the VAT treatment of goods donated by businesses to charities. The aim is to strike a balance between:

• Preventing VAT fraud or abuse
• Reducing administrative burdens on businesses that make charitable donations

This consultation will examine the types of goods donated and how they are processed and distributed. It may lead to favourable VAT reforms for business charity donations.

To participate in the consultation or learn more, click here.

5. HMRC to Cut Down on Paper Correspondence

In a push to modernise tax administration, HMRC is reducing paper-based communication and shifting to digital formats. The initiative aims to save £50 million annually in print and postage costs by the 2028–29 tax year.

Critical letters and communications will still be sent by post to those without digital access. However, most routine correspondence — including reminders, statements, and notices — will now arrive via HMRC’s online portals or email.

Need Help Navigating the New Tax Measures?

These latest tax administration reforms are part of the UK government’s broader efforts to simplify the tax system and embrace digital transformation. While many of these changes are intended to support business growth and reduce complexity, it’s essential to understand how they may affect your unique situation.

At EOACC, we’re here to help you stay compliant, reduce admin, and make the most of tax opportunities available to you.

Get in touch today to find out how these 2025 HMRC updates affect your business — and how to prepare. Read the full Written Ministerial Statement here:
UK Parliament Statement – HCWS607