Understanding the tax and policy changes coming into effect from April 2025

The start of a new tax year often brings several changes to tax policies which impact small businesses, self-employed people, and employers. In this article we go through some of the key changes which will come into effect from April 2025. We also have an article which talks about what you can do to help your business prepare for a new financial or tax year.

Business rates

Business rates are usually charged on properties used for non-domestic purposes, such as shops, guest houses, and offices. The government sets a “multiplier value” which is multiplied by the property’s rateable value to work out what business rates it will pay.

Rates relief for retail, hospitality and leisure properties

Retail, hospitality, and leisure (RHL) business properties based in England will receive 40% business rates relief, up to a maximum of £110,000 per business in 2025/26 (6th April 2025 to 5th April 2026).

The multipliers for these properties will be permanently reduced starting from 2026/27 (6th April 2026 – 5th April 2027).

The small business and the standard multipliers

The small business multiplier used for eligible business properties in England will remain at 49.9p in 2025/26. The standard multiplier is increasing to 55.5p.

Capital allowances

Businesses can use capital allowances to claim a reduction on their tax bill against the expense of owning and maintaining assets over a long period of time. Things like vehicles, machinery, and equipment, are often used as an example.

There are different types of capital allowances so the rules can vary. With first year allowances (FYA) you can claim up to 100% of an asset’s value in the same accounting period you buy it.

Referred to as ‘Green First Year Allowances’, they will be available for qualifying expenditure on zero-emissions cars, and on plant or machinery required for electric vehicle charge points until:

• 31st March 2026 for Corporation Tax
• 5th April 2026 for Income Tax

Capital Gains Tax (CGT)

Capital Gains Tax, or CGT for short, is charged on the “gain” you make from disposing of assets. The rate of CGT charged on ‘main rate’ items (not including property) increased with effect from 30th October 2024, but won’t change for 2025/26.
 

Business Asset Disposal Relief (BADR)

Some businesses are able to claim Business Asset Disposal Relief to reduce the rate of Capital Gains Tax they must pay. In short, rather than pay the usual rate of Capital Gains Tax, BADR means you pay a lower rate. From 6th April 2025 this rate will change from 10% to 14%. In April 2026 it increases again to 18%.

Company cars and vans

Driving a company car or van on personal journeys is seen by HMRC as a taxable perk, which can affect the tax paid by individuals and the company providing the benefit. From April 2025/26:

• The flat-rate van benefit charge will increase to £4,020 for drivers who use company vans for personal trips
• The multiplier for the car fuel benefit will increase to £28,200
• The flat-rate van fuel benefit charge increases to £769
• Double cab pickups which were previously treated as vans will lose this tax benefit, and will instead receive the same tax treatment as cars

Creative Industries tax relief

Companies operating in the creative industries may be able to claim tax relief against their bill for Corporation Tax. Some relief schemes will no longer be available from April 2025, and will be replaced with expenditure credits.

Corporation Tax

Corporation Tax isn’t changing, with the main tax rate expected to remain capped at 25% but marginal rate relief may help reduce this.

Employers

Employers will see several changes come into effect from April 2025, including National Insurance, and minimum wage. New rules for reporting benefits in kind will come in April 2026, but it’s important to mention it now in case this means you need to change your current processes or systems.

Employer’s National Insurance changes

From 6th April 2025:

• The rate of National Insurance employer’s must contribute increases from 13.8% to 15%
• Secondary Threshold (the point at which employers start paying National Insurance on an employee’s wages) decreases from £9,100 to £5,000
• The Employment Allowance (the allowance which eligible employers get to reduce their NI bill) increases from £5,000 to £10,500

These changes may affect the way directors pay themselves from their own limited company in order to remain tax efficient.

Employer’s National Insurance relief for veterans

The relief scheme which allows employers to hire qualifying veterans without making National Insurance contributions on earnings up to the Veterans Upper Secondary Limit of £50,270 for the first year of employment has been extended until 5th April 2026.

National Living Wage and National Minimum Wage changes from April 2025

Employers are required to pay the National Living Wage to employees aged 21 or older, and not in the first year of an apprenticeship. The minimum hourly rate is increasing from £11.44 to £12.21 per hour in April 2025.

Apprentices and workers aged 20 or younger are covered by different rules, called the National Minimum Wage (NMW). From April 2025 they are:

• Apprentices and under 18s: £7.55 per hour
• 18 to 20 year olds: £10 per hour

Reporting benefits in kind

Some employers provide extra perks to their staff. Even though they’re not cash, they increase the value of what an employee receives as payment, so they must pay tax on the equivalent value of this ‘benefit in kind’.

Employers can currently report benefits in kind through a P11D form or through payroll. From April 2026, it will be mandatory to use payroll software to report these.

Furnished Holiday Lets

The tax advantages available to Furnished Holiday Lets will no longer be available from April 2025, and this type of property will instead be treated like a long-term let.

High Income Child Benefit Charge (HICBC)

Employed individuals who pay the High Income Child Benefit Charge will be able to report payments through a new digital service. This will allow you to pay HICBC through your tax code (so your take-home pay will be adjusted accordingly and your payments will be collected through PAYE), rather than by submitting a Self Assessment tax return.

Late payment penalties for tax

Paying your tax bill late results in an automatic penalty. From April 2025 the penalty for MTD VAT payers and anyone signed up for MTD IT will increase to:

• 3% of the tax owed if you’re overdue by 15 days
• 3% of the tax outstanding at day 15, plus 3% where tax is overdue by 30 days
• The above, plus 10% per annum if your tax is overdue by 31 days or more

Paying interest on late tax payments

Starting from 6th April 2025, the late payment interest rate charged on unpaid taxes will rise by 1.5 percentage points. The interest is charged as well as the penalty for late payment.

National Insurance

National Insurance rates and thresholds will remain largely the same for employees and self-employed people, except:

• Employees: Lower Earnings Limit (LEL) increases from £6,396 to £6,500: Employees don’t pay National Insurance at this threshold, but earnings above it will earn NI ‘credits’ and accrue benefits such as the State Pension
• Self-employed: Small Profits Threshold (SPT) increases from £6,396 to £6,845: Self-employed people don’t need to make National Insurance contributions on earnings at this level, but earning above it entitles them to NI credits

Non-UK domiciled (non-dom) tax rules

The rules around non-UK domiciled individuals will be abolished and the scheme replaced with a new regime with effect from 6th April 2025.

Stamp Duty Land Tax

The rate of Stamp Duty Land Tax (payable in England) due on the purchase of second homes, buy-to-let residential properties, and companies buying residential property rose from 3% to 5% from 31st October 2024. From 1st April 2025 the rates and bands for SDLT will be:

• 0% on properties up to £125,000
• 2% on the next £125,000 (the portion from £125,001 to £250,000)
• 5% on the next £675,000 (the portion from £250,001 to £925,000)
• 10% on the next £575,000 (the portion from £925,001 to £1.5 million)
• 12% on the remaining amount (the portion above £1.5 million)

SDLT charged when companies purchase properties costing more than £500,000 is 17%.

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