Some big changes to the UK’s tax regime come into force in April, affecting businesses and individuals. Unfortunately, given the weak state of the public finances, the general effect is to increase the amount of tax individuals and businesses will have to pay.
The changes do honour Labour’s manifesto commitment not to increase taxes on workers, which it deems to be income tax, VAT and national insurance contributions (NIC). The distinction between increases to employee and employers’ NICs had not been made before the general election in July 2024 so many company owners were left feeling misled and disappointed by the increase in their payments. The rise to employers’ NICs was in fiscal terms the biggest change announced by the chancellor.
Employers’ NICs
NIC liabilities for employers will become more onerous from the new tax year beginning on 6 April. This has been the most talked about and – along with inheritance tax changes for farmers – the most controversial and unpopular element of Rachel Reeves’s autumn statement.
As a result of the NICs increase, the government expects its tax take to rise by between £23.8 billion and £25.7 billion a year over 2025-26 to 2029-30. This will be offset by payments to public sector employers of between £4.7 billion and £5.1 billion aimed at avoiding the higher NICs rate increasing the cost to the Treasury of funding public sector employers.
There are three aspects for employers to be aware of:
- The increase in employers’ NICs (secondary Class 1 NICs) from 13.8% to 15%.
- A cut in the secondary threshold from £9,800 to £5,000.
- An increase in the employment allowance. Up until 5 April employers with employers’ NICs bills of £100,000 or less can deduct £5,000 from it. The allowance will be increased to £10,500 and the £100,000 threshold will be removed.
It has been reckoned that 940,000 employers will pay more NICs in 2025-26. Many people have feared the extra cost on business will lead to reduced economic growth across the UK and lower levels of employment. UK employment was at 74.8% over September to November, according to the Office for National Statistics, so it will be interesting to keep an eye on this figure to see how justified these concerns turn out to be.
Non-doms
From 6 April 2025 tax rules for non-UK domiciled people will be replaced with a residence-based tax system.
The new rules give 100% relief on foreign income and gains for four years for people who arrive in the UK. To qualify they must not have been tax resident in the UK in any of the 10 years before their arrival.
The plan in fact originated under the Conservatives when Jeremy Hunt was the chancellor; however, Labour has adopted it as its own.
According to HMRC data, 74,000 people claimed non-dom status in 2022-23. This meant they could elect not to pay UK tax on money earned overseas on the basis that they paid it in the country in which they were domiciled for tax purposes. This was usually the country in which their father was born. A non-dom could have a British passport and conversely someone could be tax resident in the UK while holding a foreign passport.
Tax return information requirements
Here, two requirements that were voluntary become compulsory.
From 6 April 2025 a person who starts or ceases to trade during a tax year must report the beginning or cessation day in the tax return for that year. Before this date, there was no requirement to do so.
Directors of close companies must report this status; hitherto, reporting this was voluntary. The report must contain the following information.
- The name and registered number of the close company.
- The value of dividends received from the close company for the year.
- The director’s percentage shareholding in the company for the year.
A close company is one where all participators are also directors or those under the control of five or fewer participators.
Capital gains tax
Capital gains tax (CGT) rates on gains that attract business asset disposal relief (BADR) or investor’s relief go up on 6 April 2025 to 14% from 10%. A year later they rise again to 18%.
Tax rates for carried interest (usually paid by private equity investors when they liquidate an investment) are changing on 6 April 2025. Before this date investors paid either 18% or 28%. These rates will be replaced by a flat rate of 32%.
From 6 April 2026 carried interest will be linked to income tax as a 72.5% multiplier will be applied to the amount of interest on which tax is payable.
All these changes were announced at the 30 October budget. Other CGT changes announced at the autumn statement took effect immediately. These were increases to the lower and higher rates of CGT to 18% and 24% from 10% and 20% respectively.
Property owners – furnished holiday lets
A more favourable regime that applied to furnished holiday lets (FHL) disappears on 1 April 2025 for companies and on 6 April 2025 for individuals.
Before 6 April individuals operating furnished holiday lets benefited from:
- Being able to deduct interest in calculating taxable income.
- Being able to claim capital allowances for some capital expenditure.
- Some availability of capital gains tax relief, such as BADR, on disposal of the property.
The standard property business tax rules will apply to owners after these dates.
Residential stamp duty land tax
The more favourable stamp duty land tax (SDLT) regime introduced under the Conservatives in 2022 disappears on 31 March 2025. The return to the former bands means many buyers will have to pay considerably more tax when buying a residential property. There are three key changes.
- The residential nil rate band reverts to £125,000 after being increased to £250,000.
- The first-time buyers’ nil rate band goes back to £300,000, down from £425,000.
- The maximum purchase price for first-time buyers’ relief will return to £500,000, down from £625,000.
Given the impact these changes will have on individuals and companies’ finances it is well worth speaking to a tax expert to make sure that you are paying no more tax than you need to be.
For bespoke advice about your personal or business finances, please contact Finsbury Robinson. We are a full-service tax, accountancy and business advisory firm, and our friendly and highly experienced team is available on 020 8858 4303 or via email at info@finsburyrobinson.co.uk to answer all your questions
