Business tax changes for the 2025/26 year

As the 2024/25 tax year draws closer, Andy Gibbs ATT CTA of TaxAssist Accountants explains some key tax changes to be aware of in the coming months.

End of tax year changes for businesses

To help you make sure you have done all you can to ensure your company’s tax affairs are as efficient as they can be, we have identified some of the key themes that business owners should be aware of when it comes to post year-ended changes.

National Insurance Contributions (NIC)

One of the key tax increases businesses need to plan for is the rise in National Insurance Contributions (NIC) paid by employers in respect of the wages they pay their employees. From 6 April 2025, the NIC rate employers must pay will increase by 1.2%, from 13.8% to 15%.

This combines with a change to the point employers start to pay NIC to present a real challenge for many businesses. The threshold where employer NIC contributions become payable will fall from £9,100 to £5,000.

Employment Allowance

On the flip side, the Employment Allowance, which is available to certain eligible businesses to reduce their employer NIC, will become more generous. Currently, eligible businesses with employer NIC bills of £100,000 or less in the previous tax year may deduct £5,000 from their employer NIC bill, by claiming the allowance. From 6 April, the allowance will rise from £5,000 to £10,500, and the £100,000 eligibility threshold will be removed so eligible employers with employer NICs bills can claim the allowance.

The Employment Allowance can’t be claimed if you are a company with only one employee paid above the Class 1 NIC secondary threshold and that employee is also a director of the company. Certain other restrictions apply to companies making claims so you should seek advice to determine if your business can claim this valuable relief.

National Minimum Wage

National Living Wage (NLW) and National Minimum Wage (NMW) increases take effect from 1 April 2025:

For 21-year-olds and over, NLW will increase to £12.21 per hour (an increase of £0.77)
For 18 to 20-year-olds, NMW will increase to £10.00 per hour (an increase of £1.40)
For 16 to 17-year-olds, NMW will increase to £7.55 per hour (an increase of £1.15)

Businesses must ensure it budgets for these changes – especially if it has a large workforce at or near this wage level.

Asset and business sales

The 2024 Autumn Budget introduced changes to Capital Gains Tax (CGT) rates. CGT rates on residential property will remain at 18% for basic rate taxpayers and 24% for higher rate taxpayers. However, for assets such as shares, the CGT rates are due to increase. In a blow to business owners, the CGT rate for Business Asset Disposal Relief (BADR) and Investors’ Relief will increase from 10% to 14% from 6 April 2025 and will increase again to match the lower main rate of CGT at 18% from 6 April 2026.

Business owners and farmers should also be aware that valuable inheritance tax (IHT) reliefs are due to be less generous from April. The so called 100% Agricultural and Business Property Relief rate of relief is set to continue, but only for the first £1 million of combined agricultural and business assets. Thereafter, only 50% relief will apply. Business owners may wish to factor these changes into their succession plans.

Changes to Companies House reporting

Upcoming changes to Companies House reporting may affect small and micro businesses. Proposed changes include transitioning towards filing accounts by software only, the end of abridged and filleted accounts and new rules for registered offices. Small companies that do not qualify as micro entities will also need to file a director's report.

Employment Rights Bill

Business should also be aware that the 2024 Employment Rights Bill is intended to create greater flexibility and employee protections, so you may need input from an employment lawyer, where these greater employee rights impact your operations.

Summary

With significant changes on the horizon, and a closing window to review year-end tax planning, businesses should make some time to ensure they are tax efficient and are prepared for the year ahead.

This article is intended to inform rather than advise and is based on legislation and practice at the time. Circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

About the author

Andy Gibbs ATT CTA is Director of Services at TaxAssist Accountants and is a qualified Chartered Tax Adviser (CTA) and holds the STEP Advanced Certificate in Trust and Estate Accounting. He has dealt with both tax compliance and tax advisory projects across a range of industry sectors.