Changes to Tax from April 2025

As we mentioned in our Spring Budget review, the Chancellors Spring Statement did not give us much to chew over; instead, it puts the spotlight firmly back on the tax changes announced in the Autumn Budget.

The Chancellor committed to only holding one fiscal event a year with tax changes. At the time, the government thought such a move would bring stability for businesses and individuals. However, with even the Chancellor acknowledging that the world has changed, and the fiscal headroom being blown in the months since the Autumn Budget, more tax upheaval may be coming.

When the Chancellor announces her Autumn Budget later this year, could we see the government break the manifesto pledges on tax rises? Perhaps extending the freezing of thresholds and allowances for another couple of years… On the other hand, will they introduce a new tax as the previous government did with the health and social care levy, such as a Wealth Tax, currently finding its way into the press?

On the back of the Spring Statement, HMRC released their own Spring Statement document together with a number of consultations and policy papers.

The most notable of these being:

• Modernising the tax system through Making Tax Digital
• Closing in on promoters of marketed tax avoidance
• Research and Development tax relief advance clearances
• Enhancing HMRC’s ability to tackle tax advisers facilitating non-compliance

Tax Changes Taking effect from 1/6 April 2025

The start of the new financial year for companies and the new tax year for individuals will see some significant changes to taxation. Some of the changes were announced at the Autumn Budget in 2024 – including the changes to National Insurance Contribution (NIC) rates, thresholds and allowances for employers, which continue to attract headlines – While others first saw life under the previous government and have since been tweaked, such as the abolition of the special tax rules for Furnished Holiday Lets (FHLs).

Businesses:

Employers’ NIC – changes announced in the Autumn Budget 2024 will increase liabilities to secondary NIC for many employers for 2025/26. The rate of secondary NIC paid by employers on an employee’s earnings above the secondary threshold will increase from 13.8% to 15%; and the secondary threshold will reduce from £9,100 to £5,000 per annum 

NIC Employment Allowance – To compensate smaller employers for the changes to secondary NIC, the maximum amount of the NIC employment allowance is increasing from £5,000 to £10,500 with effect from 6 April 2025. Further, a key restriction is removed: from 6 April 2025, the employment allowance is no longer restricted to employers with a prior tax year secondary NIC liability of £100,000 or less. The employment allowance is offset against the employer’s secondary NIC liabilities. A number of important restrictions remain; including that single director, limited companies (e.g. some personal service companies) with no other employees paid above the secondary threshold cannot claim the employment allowance

Double cab pick-ups – Traditionally, HMRC has treated double cab pick-ups (DCPUs) with a payload of one tonne or more as goods vehicles. From 1/6 April 2025, HMRC will consider a vehicle’s primary suitability at the time it was made, with reference to the vehicle as a whole, for the purposes of:

– capital allowances;

– the BIK rules; and

– some deductions from business profits.

This is likely to mean that most DCPUs will be treated as cars for direct tax purposes. Transitional rules apply to preserve the previous, more beneficial, treatment in some circumstances.

Note however, no changes have been made to the VAT treatment.

It is also worth noting that all Benefit in Kind percentages for cars will increase by 1 percentage point for 2025/26. Also, significant increases to the BIK percentages for hybrid cars which were announced in the Autumn Budget 2024 will take effect from April 2028

Individuals:

Non-UK domiciled individuals – From 6 April 2025, the long-standing tax rules for non-UK domiciled individuals (non-doms) are being abolished and replaced with a residence-based regime. The new regime provides 100% relief on foreign income and gains for new arrivals to the UK in their first four years of tax residence, provided they have not been UK tax resident in any of the 10 consecutive years prior to their arrival 

Tax Return information requirements – From 6 April 2025 (2025/26 and later tax years), new mandatory tax return requirements apply to:

– taxpayers who start or cease to trade. Where a person starts or ceases to trade during a tax year, they must report the date of commencement/cessation in the tax return for that year. This requirement was voluntary but is now mandatory;

– directors of close companies. The voluntary requirement to indicate if the person is a director of a close company is made mandatory. In addition, the person must provide the following information:

 the name and registered number of the close company;

 the value of dividends received from the close company for the year; and

 their percentage shareholding in the company during the year

Rates of CGT –

– The rate of Capital Gains Tax (CGT) on gains attracting Business Asset Disposal Relief (BADR) or investors’ relief is increased from 10% to 14% with effect from 6 April 2025. The rate will increase to 18% from 6 April 2026.

– the lower and higher rates of CGT for carried interest gains (18% and 28%) are replaced with a flat rate of CGT of 32%. From 6 April 2026, carried interest will be brought within the income tax framework, with a 72.5% multiplier applied to the amount of interest subject to tax.

National Minimum Wage – will rise from £11.44 an hour to £12.21 an hour in April 2025 for those aged 21 and over. The rate for 18 to 20 year-olds will rise from £8.60 to £10 per hour

Property owners:

Furnished Holiday Lets – The FHL tax rules are abolished with effect from 1 April 2025 for companies from 6 April 2025 for individuals. From that date, the UK or overseas property business rules apply as appropriate. Transitional rules apply in some circumstances, for example, to allow capital allowances to be claimed in respect of expenditure in a capital allowances pool at 1/5 April 2025.

Residential rates of SDLT – The temporary residential rates of Stamp Duty Land Tax (SDLT) introduced by the previous government in 2022 were withdrawn on 31 March 2025. For transactions with an effective date on or after 1 April 2025, the residential nil rate band will revert to £125,000 (from £250,000), the first-time buyers’ relief nil rate band will revert to £300,000 (from £425,000); and the maximum transaction value for first-time buyers’ relief will revert to £500,000 (from £625,000). 

The Annual Tax on Enveloped Dwellings (ATED) is a tax on non-natural persons (e.g. companies) with interests in UK dwellings valued at more than £500,000. It is calculated and paid on an annual basis. The amount charged is determined by the band the property falls into and whether or not a relief applies. The ATED charges increase automatically each year in line with inflation. For companies caught at 1 April 2025, the return must be submitted and the tax paid for the year ending 31 March 2026 by 30 April 2025

As always, the information outlined above is for general guidance purposes only. We appreciate that every individual and business has different circumstances and you should always seek appropriate professional advice before you act on any of the information provided.

If you would like more information, advice or require wider business planning or financial guidance, please do get in touch with your GWA Partner. Alternatively, if you are not a GWA client please do contact us to arrange a free initial meeting.