As we step into a new financial year, tax changes are rolling in - some subtle, some significant, but all requiring attention. Whether you’re an employer, landlord, sole trader, or investor, these updates will impact your tax obligations from April 2025 ...
With these important tax changes happening in April 2025 the Business Godparent stands ready to advise you!
From shifts in National Insurance contributions to adjustments in Capital Gains Tax and the abolition of Furnished Holiday Lettings rules, the landscape is evolving. Employers will see increased costs, landlords must navigate new property tax treatments, and non-domiciled individuals face a complete overhaul of their tax status. So what changes are there?
Employers' National Insurance Contributions (NIC): Increased Costs Ahead
From 6 April 2025, the rate of secondary NIC paid by employers will increase from 13.8% to 15% on employees' earnings above the secondary threshold. At the same time, the secondary threshold itself is being reduced from £9,100 per year to £5,000 per year. This means more of an employee's salary will be subject to NIC, increasing overall payroll costs for businesses.
For many employers, this change will have a noticeable impact on budgeting, especially for those with a significant workforce. If your business relies heavily on staff paid above the secondary threshold, you may need to factor in these increased costs when reviewing wages and employment strategy.
NIC Employment Allowance: A Small Boost for Smaller Businesses
To balance out the impact of the NIC increase, the employment allowance is being raised from £5,000 to £10,500 per year. Additionally, the previous restriction that limited this allowance to businesses with a prior-year secondary NIC liability of £100,000 or less is being removed. This means more employers will be able to benefit from this relief.
However, it's important to note that some restrictions remain. Single-director limited companies with no other employees are still ineligible for the allowance. For other businesses, though, this increase provides some relief against the rising costs of employing staff.
Double Cab Pick-Ups: Tax Classification Changes
From 1 June 2025, HMRC will change the way double cab pick-ups (DCPUs) are taxed. Instead of automatically treating them as goods vehicles, tax treatment will now be based on their primary suitability at the time of manufacture. This means that most DCPUs will now be classified as cars for capital allowances, Benefit-in-Kind (BIK) rules, and deductions from business profits. Transitional rules will apply in some cases to preserve the previous treatment.
Company car owners should also be aware that all BIK percentages for cars will increase by 1 percentage point in 2025/26. In addition, significant BIK increases for hybrid cars were announced in the Autumn Budget 2024, which will take effect from April 2028.
Non-UK Domiciled Individuals: A New Tax Regime
From 6 April 2025, the long-standing tax rules for non-UK domiciled individuals—commonly known as "non-doms"—will be abolished and replaced with a residence-based system. Under this new regime, new arrivals to the UK will receive 100% relief on foreign income and gains for their first four years of UK tax residence, provided they have not been UK tax residents in any of the previous 10 years.
This marks a significant shift in tax policy, particularly for those who have relied on non-dom status for tax planning. Individuals affected should review their tax strategies well in advance of these changes to ensure they remain tax-efficient.
Capital Gains Tax (CGT): Rising Rates
From 6 April 2025, the capital gains tax rate for Business Asset Disposal Relief (BADR) and Investors' Relief will rise from 10% to 14%, with a further increase to 18% scheduled for April 2026. Carried interest gains, which are currently taxed at 18% or 28%, will instead be taxed at a flat rate of 32% from April 2025. One year later, from April 2026, carried interest will be subject to income tax rules, with a 72.5% multiplier applied to the taxable amount.
These changes are part of a broader package of CGT reforms announced in the Autumn Budget 2024. Additionally, from 30 October 2024, the lower and higher CGT rates for non-BADR, non-investors' relief, and non-residential property gains will increase from 10% and 20% to 18% and 24%, respectively. Investors and business owners should consider their disposal strategies carefully to manage potential tax liabilities.
Furnished Holiday Lets (FHL): The End of an Era
From April 2025, the tax rules for furnished holiday lets (FHLs) will be scrapped. For companies, the change takes effect from 1 April 2025, while for individuals, it applies from 6 April 2025. After these dates, all such properties will fall under the standard UK or overseas property business rules.
Under the new regime, landlords will no longer be able to offset FHL losses against general income. However, transitional provisions will allow capital allowances to be claimed in respect of expenditure in a capital allowances pool as of 1/5 April 2025.
Stamp Duty Land Tax (SDLT): Temporary Rates Ending
The temporary residential SDLT rates introduced in 2022 will be withdrawn on 31 March 2025. From April onwards, SDLT rates will return to pre-2022 levels, which means buyers may face higher costs when purchasing residential property. If you are considering a property transaction, it may be worth factoring in this deadline when making financial decisions.
Annual Tax on Enveloped Dwellings (ATED): Inflation-Adjusted Increases
The Annual Tax on Enveloped Dwellings (ATED) applies to non-natural persons, such as companies, that own UK residential properties valued above £500,000. This tax is calculated annually based on property value bands, with charges increasing each year in line with inflation. Property owners should be aware that these increases will continue in 2025 and beyond.
Additional Changes Worth Noting
National Minimum Wage (NMW) rates will increase from 1 April 2025, with the minimum wage for workers aged 21 and over rising to £12.21 per hour. Workers aged 18 to 20 will see an increase to £10.00 per hour, while apprentices and those under 18 will receive £7.55 per hour.
Late payment penalties for HMRC will also become stricter from April 2025. Currently set at 2% at 15 and 30 days, penalties will rise to 3%, with the penalty for payments overdue by 31 days increasing from 4% to 10% per annum. Businesses and individuals should ensure their tax payments are made on time to avoid these additional charges.
"With so many changes taking effect from April 2025, now is the time to review your financial and tax planning!"
Employers should assess the impact of increased NIC costs, while small businesses should check if they qualify for the higher employment allowance. Landlords, property investors, and those with company cars should consider how these updates affect their tax positions.
Non-UK domiciled individuals need to plan ahead for the transition to the new residence-based tax system, while those with capital gains should evaluate disposal timings in light of the new CGT rates.
The Business Godparent stands ready to advise you.
Until next time ...
ROGER EDDOWES Business Godparent
Would you like to know more?
If anything I've written in this blog post resonates with you and you'd like to discover more about these important tax changes, it may be a great idea to call me on 01908 774320 and let's see how I can help you.
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Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach.
Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.
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