Navigating the 2025 Tax Season

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ICAEW’s Tax Faculty highlights 10 key changes set to take effect from 1 April 2025 for companies and 6 April 2025 for individuals and unincorporated businesses.

As the new financial year for companies and the new tax year for individuals approach, several significant taxation changes will impact a diverse range of taxpayers. Some of these adjustments were revealed during the Autumn Budget 2024, including updates to national insurance contributions (NIC) rates, thresholds, and allowances for employers, which continue to make headlines. Other changes originated under the previous government and have been revised, such as the elimination of special tax rules for furnished holiday lets (FHLs).

April 2026 could bring even more activity, as it will mark the implementation of Making Tax Digital for income tax affecting many sole traders and landlords, along with the mandatory payrolling of benefits in kind (BIK).

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For Businesses

Employers NIC:

• The secondary NIC rate, which employers pay on the earnings of their employees above a certain threshold, will increase from 13.8% to 15%. This change is expected to raise the financial burden on employers.
• The secondary threshold itself will drop significantly from £9,100 to £5,000 annually, altering the point at which the higher NIC rate begins to apply.

NIC Employment Allowance:

• To ease the transition for smaller employers, the NIC employment allowance will be increased from £5,000 to £10,500. This allowance helps offset employers' secondary NIC liabilities.
• Restrictions that previously limited this allowance to employers with a secondary NIC liability of £100,000 or less will be lifted, allowing a broader range of employers to benefit.

Double Cab Pick-Ups:

• These vehicles, traditionally classified as goods vehicles if their payload exceeds one tonne, will now be assessed based on their primary suitability at manufacture. This reclassification is likely to affect capital allowances and benefits-in-kind (BIK) rules, potentially leading to these vehicles being considered as cars for tax purposes.

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For Individuals:

Non-UK Domiciled Individuals:

• The existing tax rules for non-doms will be replaced with a residence-based system. New arrivals to the UK will receive a 100% relief on foreign income and gains during their first four years of residence, provided they haven't been UK tax residents in the previous decade.

Tax Return Requirements:

• New mandatory reporting requirements will be implemented. Taxpayers who start or stop trading within a tax year must report these changes in their tax returns. Additionally, close company directors will now be required to provide detailed information about their directorships.

Capital Gains Tax (CGT):

• The rate for business asset disposal relief will increase from 10% to 14%, with further increases planned. Other CGT rates will also see adjustments, reflecting broader tax policy changes.

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Property Owners:

Furnished Holiday Lets:

• The tax advantages previously available to both companies and individuals owning furnished holiday lets will be abolished. This marks a significant shift for property businesses that had benefited from these provisions.

Residential SDLT:

• The temporary residential stamp duty land tax rates, introduced in 2022, will revert to previous levels after March 31, 2025. This includes changes to the nil rate band for both general residential properties and first-time buyers.

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As these changes approach, it's crucial for individuals and businesses to familiarise themselves with the new requirements and consider their implications for financial planning and compliance.