This Month in Finance: UK Updates – May 2025 Edition
May often feels like a reset button, and this year, the UK’s financial scene is certainly shifting.
From interest rate cuts to digital tax changes and bold pension reform, the UK financial news for May 2025 is full of developments that could shape how you manage your finances over the next year.
We’ve gathered the key highlights for you; straightforward, easy to follow, and backed by trusted sources.
Let’s get you up to speed.
Economic Outlook: IMF Revises Growth Forecast Upward
The IMF now expects the UK economy to grow by 1.2% in 2025, thanks to a stronger-than-expected start to the year.
However, it’s also warning that rising global trade tensions (especially US tariffs) may cool that momentum in the months ahead.
Interest Rate Cut: BoE Lowers Base Rate to 4.25%
As part of the UK financial news for May 2025, the Bank of England reduced its base rate by 25 basis points to 4.25% on 8 May; marking its second rate cut this year.
The move is aimed at stimulating domestic demand as inflation continues to fall and external risks rise.
Making Tax Digital: More Detail, More Clarity
If your qualifying income exceeds £20,000 for the 2026 to 2027 tax year, you’ll soon be required to submit digital income tax updates under the MTD for Income Tax scheme.
The government is preparing legislation to confirm exactly when this will apply.
GOV.UK’s guidance has been updated to reflect the following:
•Clearer info on who is exempt now appears at the top of the page.
•The section on what to do before you start now links to step-by-step help and outlines what needs to happen before the start of the tax year.
It’s a good idea to get familiar with the new process now, before it becomes mandatory.
Pension Reform: New ‘Megafunds’ to Boost Investment
The Chancellor has proposed bringing together smaller pension pots into large-scale ‘megafunds’ each with at least £25bn in assets.
The goal is to boost returns for savers while also channelling long-term investment into British innovation and infrastructure.
VAT Fuel Scale Charges Updated for 2025–26
New VAT fuel scale charges have taken effect as of 1 May 2025.
Businesses using company cars must apply these revised rates from the beginning of their next accounting period.
That’s everything for this month!
If any part of the UK financial news for May 2025 has raised questions, or if you’d simply like a second pair of eyes on your business finances; we’re just a message or a call away!
Until next month,
Demsa Accountants Team
Supporting your finances, the smart way.
