Labour’s Autumn Budget introduced a number of changes that will affect businesses and the self-employed, many of these are shortly coming into force as we enter the new tax year.
We have highlighted all of the tax changes coming into effect in the 2025/26 tax year, to help you and your business stay compliant and prepared for the year ahead.
Increase to employers’ National InsuranceOn 6 April 2025, the rate of employers’ National Insurance contributions (NICs) will rise from 13.8% to 15%.
In addition, the threshold at which employers start to pay NICs (known as the secondary threshold) will decrease from £9,100 to £5,000 per year.
You will need to update your payroll software to with the rate increase and changes to the secondary threshold.
Employment Allowance changes to benefit small businessesTo support smaller businesses from the employer’s NICs raise, the Employment Allowance will increase from £5,000 to £10,500 per year starting on 6th April 2025.
The £100,000 threshold for eligibility will also be removed, making the allowance eligible to all employers with employer NIC payments.
Other National Insurance changesThe Lower Earnings Limit will increase by 1.7% starting on 6th April 2025 to £6,500 per year, which is the minimum amount an employee must earn before they have to pay NICs.
The Small Profits Threshold will also increase by 1.7% to £6,845 per year.
For anyone paying voluntarily, Class 2 and Class 3 NICs these will also increase by 1.7% in 2025/26.
The Class 2 rate will rise to £3.50 per week and the Class 3 rate will be £17.75 per week.
Minimum wage increase
From 1 April, the National Living Wage rate will rise to £12.21 for employees aged 21 and above. Alongside this, the National Minimum Wage rate will increase to:
- £10 for employees aged 18-20
- £7.55 for employees who are under 18
- £7.55 for apprentices.
Statutory pay and employer relief changesStatutory parental pay is also set to increase in the coming tax year to £187.18 per week, starting on 6th April 2025.
Alongside this Statutory Sick Pay (SSP) will rise to £118.75 per week, from 6th April 2025.
The small employer’s relief rate is also increasing to 108.5%.
This means that an eligible small employer who provides statutory payments, such as Statutory Maternity Pay (SMP), can reclaim 100% of the payment, plus an additional 8.5% relief from HMRC in 2025/26.Larger employers are still eligible to reclaim 92%.
Capital Gains Tax changesThe tax rate for Business Asset Disposal Relief (BADR) and Investors’ Relief (IR) will increase in stages in the coming year, rising from 10% to 14% from 6 April 2025, before reaching 18% from 6 April 2026.
If you’re planning to sell business assets, please be aware, these changes could lead to higher tax liabilities.
To manage the impact, please speak to us to review your disposal plans and consider the timing of any sales.
Retail, Hospitality and Leisure Scheme extensionThe Retail, Hospitality and Leisure (RHL) Business Rates Relief scheme will be extended for 2025/26.
If you run a retail, hospitality or leisure business in the UK, this means you can continue to claim 40% business rates relief, capped at £110,000 per business.
The small business multiplier will remain frozen at 49.9p, while the standard multiplier will increase to 55.5p.
This relief provides interim support until permanently lower tax rates take effect in 2026/27.
Student loan threshold changesEmployers need to be aware that some student loan repayment thresholds will increase for the 2025/26 tax year, affecting borrowers on Plan 1, Plan 2, and Plan 4 loans.
The postgraduate loan (which are Plan 3 loans) threshold remains unchanged at £21,000.
Repayments only begin once earnings exceed the set threshold, with deductions taken as a fixed percentage of income above that amount.
These updates impact both employees repaying through PAYE and self-employed individuals completing Self Assessment tax returns, as they determine how much is deducted from earnings.
Revised alcohol dutyAlready introdcued earlier in 2025, alcohol duty on draught products has decreased by 1p per average-strength pint.
The mandatory duty stamps for spirits have also been removed. For businesses in the brewing and pub industry, these changes could help lower operational costs and improve financial stability.
Furnished holiday lettings tax treatment scrappedThe favourable tax treatment for Furnished Holiday Lettings (FHLs) will be abolished with effect from 6 April 2025. With these rule changes, FHL properties will be treated the same as other UK or overseas property businesses, following the same tax rules as non-FHL properties.
This will apply to individuals, companies, and trusts that own, operate, or sell FHL properties.