The approaching 2025/26 tax year brings pivotal changes on the horizon. To help you navigate these upcoming adjustments, we’ve curated the essential updates. From revisions in National Insurance to the expansion of Making Tax Digital (MTD), here’s what you need to stay informed about.
1st April
National Minimum Wage Increase
Starting from April, significant increases in minimum wages are set to take effect. For 18 to 20-year-olds, the National Minimum Wage rises to £10 per hour, marking a 16.3% increase. Meanwhile, the National Living Wage for those aged 21 and over will see a boost to £12.21, a 6.7% rise. Younger workers aged 16-17 and apprentices will also benefit, with their rates rising to £7.55, an 18% increase.
Business Rates Relief for Retail, Hospitality, and Leisure
Eligible properties in England within the retail, hospitality, and leisure sectors will receive a reduced business rates relief of 40%, down from 75%. This relief is capped at £110,000 per business. Additionally, the small business multiplier in England remains frozen at 49.5p, while the standard multiplier increases to 55.5p.
6th April
Employer National Insurance Contributions Increase
A key focus area will be the rise in Employer National Insurance contributions, increasing from 13.8% to 15% on salaries exceeding £5,000. Previously, this contribution was applicable to earnings over £9,100. This change poses significant implications for businesses, necessitating careful financial management and payroll system updates to manage cash flow effectively.
Increase in Employment Allowance
The Employment Allowance will double from £5,000 to £10,500, with the removal of the £100,000 eligibility threshold. However, companies with a single employee who also serves as the director won’t qualify for this allowance.
Capital Gains Tax (CGT) Rate Adjustments
From April 2025, the CGT rate for gains under business asset disposal relief and investors’ relief increases to 14%, rising further to 18% from April 2026. Carried interest will face a higher rate of 32% and will be incorporated into the Income Tax Framework starting from the 2026/27 tax year.
Increased Interest Rates for Late Tax Payments
To mitigate the tax gap, the interest rate for late payments will rise by 1.5% to the Bank of England base rate plus 4%.
Changes to Furnished Holiday Lettings (FHL) Tax Regime
The FHL tax regime will be discontinued, integrating FHL properties into the owner’s property business, subjecting them to standard tax rules.
Introduction of Advanced Electronic Signatures
Tax advisors must use Advanced Electronic Signatures for specific income tax repayment claims.
One-Year Countdown to Making Tax Digital for Income Tax
Beginning April 2026, MTD for Income Tax will require self-employed individuals and landlords to maintain digital records and update HMRC quarterly using compatible software. Preparation during the 2025/26 tax year will be crucial to ensure seamless transition.
MTD for Income Tax will initially apply to those with qualifying income over £50,000 from April 2026, extending to those with income over £30,000 by April 2027, and eventually including those over £20,000 by 2029.
If you’re unsure how these changes might affect you, just call us.
This is information only, and not advice. If you’re not sure what’s right for you, please seek advice. Tax rules can change, and benefits depend on personal circumstances.
