Spring Statement 2025: Key Takeaways for contractors
- Umbrella Search
- Apr 3
- 4 min read
The 2025 Spring Budget was announced by Chancellor Rachel Reeves at the end of March, promising economic stability, growth and financial responsibility from the Labour party.
Although it was one of the shortest statements on record, contractors will be curious to understand the implications of the Spring Budget for them.
To help, in this guide, Umbrella Search explains measures outlined in the Spring statement and how this is set to impact contractors, so you know where you stand.
No new tax rises – but NI is still set to rise
The Chancellor was eager to assure the public in her Spring Statement that she would announce no further tax increases.
However, in her autumn budget in 2024, Reeves previously announced changes to employer National Insurance, which she confirmed would go ahead from 6th April, despite much backlash from the public.
But how does this impact contractors?
Well, contractors that work through an umbrella company may feel a direct impact on their gross pay. All umbrella companies are legally obligated to pay Employer’s National Insurance, however many pass this cost on to the contractor. With a hike in Employer’s National Insurance set to come into effect, some contractors may experience a greater deduction in their salary as they cover the cost of this rise.
It's important to remeber however, that contracts can increase their daily rate slightly to cover this additional cost.
Many contractors may actually find that the rise in national insurance opens up more opportunities for them, as employers may look to hire more flexible workers such as contractors rather than employees due to the associated costs that come with employing somebody.
As contractors are a flexible workforce, the employer faces no commitments in terms of longevity, salary, pension contributions or employer’s National Insurance. Therefore, we may see the demand for contractors rises as a knock-on effect of the NI hike.
Debt recovery and liability are on the rise
A shift towards making company directors personally liable for unpaid tax was announced in the Spring Statement.
For most contractors, this won’t impact them. However, it signals that Reeves is raising the standards, focusing on compliance, and rooting out anyone involved in disguised renumeration schemes, or companies closing down whilst they owe tax to HMRC.
Reeves also announced crackdowns on tax advisers and promoters of avoidance schemes. The government will look to implement stronger penalties on advisers who contribute to the tax gap. They will also publish details of sanctioned advisers, bring in new powers to investigate or stop such schemes early on, and may bring in criminal offences for those who run such schemes.
In fact, one of the headlines from the Spring Budget was the announcement that the government are investing heavily in HMRC. There is a planned £1bn of investment heading HMRC's way to help them fight tax avoidance and evasion.
As part of this, the government is investing in 500 new compliance officers, on top of the 5000 tax officials that were hired last year.
Although the Spring Statement didn’t directly mention the likes of IR35 or umbrella companies, it is clear that the direction that the government are moving in is towards compliance and cracking down on any tax schemes that aren’t operating as they should.
Contractors should therefore take great lengths to ensure that their advisers, accountants of umbrella companies follow best practices in order to avoid exposure or investigations by HMRC.
Government will go ahead with umbrella regulation measures
There was no mention of umbrella companies in the Chancellor’s Spring Budget, meaning that the government will go ahead with planned changes to umbrella company regulation outlined in the Autumn budget.
This means that as of April 2026, the responsibility of Pay as You Earn will move from the umbrella company to the recruitment agency or end client. Although the umbrella company will still be able to process PAYE, it will be the client or agency that will be held liable if they fail to comply with these regulations. This measure has been announced to ensure that correct amounts of PAYE is paid, and to remove any non-compliant umbrella companies from operating.
This is another example of the government's planned emphasis on compliance going forward.
Final thoughts for contractors
Although the Spring Statement didn’t announce anything unexpected for contractors, or indeed any new measures for this group of workers, it did announce major changes in the way that HMRC operates, which may impact some contractors going forward.
Focusing heavily on compliance, debt recovery, and enforcement, HMRC will crack down on corrupt tax advisers, accountants, business owners or avoidance schemes, meaning contractors will need to be 100% certain that their provider is up to scratch.
Furthermore, contractors will need to prepare themselves for planned hikes to Employer’s National Insurance. This might mean that some may consider putting up their prices to absorb the cost.
With all the emphasis on tax compliance and the huge boost to HMRC and their crackdown on tax evasion, some contractors operating through a limited company may consider that this is the right time to make the move to umbrella.
Rather than risk timely and costly investigations under new HMRC rules and spending your precious time and effort ensuring that you and your adviser or accountant are operating correctly, many contractors will now consider the easiest option to use an umbrella company.
It’s quick and easy to find an umbrella company you can work that you know you can trust.
If you’re not sure where to start, Umbrella Search is here to help. We only ever work with umbrella companies we know we can trust, so you can rest assured you’re making the best decision.
After discussing your contractor preferences, we will go away and find the most suitable umbrella companies for your needs.
To see how we can help you, simply get in touch with the Umbrella Search team today, and take the first step to finding the best umbrella company.
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