As we usher in the 2025/26 tax year, significant changes are set to impact both individuals and businesses across the UK. From adjustments in National Insurance contributions to tax-proof reforms in Capital Gains Tax, understanding these updates will be crucial for effective financial planning and finance decisions in the coming months.
Read on to discover the top 15 key tax updates businesses should be aware of in 2025/26 (and stay tuned for how to prepare with them in mind).
1. Employer National Insurance Contributions (NICs) and Employment Allowance
Effective from 6 April 2025, employers will experience an increase in NICs:
- NIC Rate Increase: The employer NIC rate will rise from 13.8% to 15%.
- Threshold Adjustment: The threshold at which employers start paying NICs will decrease from £9,100 to £5,000.
To help ease the impact on smaller businesses, the government has introduced the following support measures:
- Employment Allowance: The allowance will double from £5,000 to £10,500.
- Eligibility Expansion: The £100,000 threshold for eligibility will be removed, allowing more businesses to benefit.
These changes aim to balance the increased NICs burden, especially for small and medium-sized enterprises.
Impacts on Your Business:
- Higher staffing costs: The combination of a lower NIC threshold and higher rate means an increase in employer wage bills—especially for lower-waged roles.
- Cashflow strain for SMEs: While larger businesses may absorb the increase, smaller businesses may feel an immediate impact on operating margins.
- Opportunities missed: Failing to claim the enhanced Employment Allowance could mean missing out on significant savings.
How to Prepare:
- Conduct a full payroll audit to model the cost impact of the new NIC rates and thresholds—this includes reassessing gross-to-net pay implications across your workforce and updating payroll software accordingly. Also assess Employment Allowance eligibility and ensure this is claimed in real-time.
- Or, you could just contact Pulse. We’ve helped hundreds of clients optimise their NIC strategy, identify missed claims, and seamlessly update payroll systems. Let us help you stay compliant and cash-efficient without the stress.
2. Capital Gains Tax (CGT) and Business Asset Disposal Relief (BADR)
Significant reforms are introduced in the CGT regime:
- BADR and Investors’ Relief Rates: For disposals made on or after 6 April 2025, the tax rate will increase from 10% to 14%. This rate is set to rise further to 18% from 6 April 2026.
- Investors’ Relief Lifetime Limit: The lifetime limit for Investors’ Relief will reduce from £10 million to £1 million for qualifying disposals made on or after 30 October 2024.
These adjustments necessitate a review of disposal plans to manage potential tax liabilities effectively.
Impacts on Your Business:
- Higher tax on business sales or restructuring: Disposals post-April 2025 will attract significantly higher tax, affecting your exit strategy or investment planning.
- Reduced relief for investors: This may impact how you attract and retain external investors moving forward.
How to Prepare:
- Undertake a full CGT exposure review to map potential disposals and understand the timing implications. This involves revisiting business succession plans, investment structures, and shareholdings.
- Or, you could just contact Pulse. We’ve already helped clients bring forward key disposals and restructure equity incentives ahead of the rate change to lock in maximum tax efficiency.
3. National Living and Minimum Wage Increases
From April 2025, wage rates will see substantial increases:
- National Living Wage (21 and over): Rising from £11.44 to £12.21 per hour (6.7% increase).
- Ages 18–20: Increasing from £8.60 to £10.00 per hour (16.3% increase).
- Apprentices: Rising from £6.40 to £7.55 per hour (18% increase).
Employers should adjust payroll systems accordingly and communicate these changes to employees to ensure compliance and transparency.
Impacts on Your Business:
- Higher payroll costs: Particularly affects businesses with a high proportion of entry-level or young staff, such as hospitality or retail.
- Risk of non-compliance: Failing to update rates or payroll systems in time can lead to penalties and reputational damage.
How to Prepare:
- Manually review and update payroll settings and employment contracts to reflect new rates, ensuring all eligible employees are upgraded from the first April pay run.
- Or, you could just contact Pulse. We manage this process end-to-end for clients, ensuring wage compliance and communications with staff are handled smoothly and on time.
4. Statutory Payments and Employee Benefits
Adjustments to statutory payments include:
- Statutory Sick Pay: Increasing to £118.75 per week.
- Maternity, Paternity, Adoption, Shared Parental, and Parental Bereavement Pay: Rising to £187.18 per week.
Additionally, from 6 April 2025, employees will have a 'day one right' to neonatal care leave and pay, enhancing support for working parents.
Impacts on Your Business:
- Increased cost for leave absences: Especially if multiple team members access new statutory entitlements.
- Administrative complexity: Managing neonatal care leave introduces a new policy layer for HR teams.
How to Prepare:
- Update HR policies and payroll software to accommodate new statutory rates and the neonatal leave framework, ensuring full legal compliance.
- Or, you could just contact Pulse. We update client policies, implement payroll rule changes, and provide comms templates to streamline employee awareness.
5. State Pension and Pension Credit Adjustments
In line with the 'triple lock' commitment, pensions will see the following increases from April 2025:
- Full New State Pension: Increasing from £221.20 to £230.25 per week.
- Full Basic State Pension: Rising from £169.50 to £176.45 per week.
- Pension Credit Minimum Guarantee: Also increasing by 4.1%.
These adjustments aim to support retirees in maintaining their purchasing power amidst inflationary pressures.
Impacts on Your Business:
- Increased employee engagement in pensions: More queries from staff about their future entitlements.
- Potential rise in employer pension contributions as employees focus more on retirement planning.
How to Prepare:
- Host pension briefings and review contribution schemes to support employee awareness and financial wellbeing, especially for older staff nearing retirement.
- Or, you could just contact Pulse. We handle employee pension communications, liaise with scheme providers, and align your pension strategy with evolving workforce needs.
6. VAT Changes Affecting Education and Cross-Border Trade
Significant VAT changes include:
- Private Education: From 1 January 2025, private school fees will be subject to the standard 20% VAT rate, affecting tuition, boarding, and vocational training.
- Cross-Border Trade: Businesses engaging in trade with the EU should review their VAT arrangements due to potential changes in taxation and the implementation of the 'Green Lane' and B2C parcel arrangements under the Windsor Framework from 31 March 2025.
These changes necessitate a thorough review of VAT compliance and potential financial implications for affected entities. Be sure to stay up to date with any changes to the VAT threshold 2024.
Impacts on Your Business:
- Significant cost pressure for private schools and educational suppliers.
- Operational disruption for businesses trading with the EU if VAT systems aren’t updated.
How to Prepare:
- Perform a full VAT impact assessment and update invoicing and accounting processes to apply correct VAT treatment post-deadlines.
- Or, you could just contact Pulse. We’ve supported clients with education VAT transitions and EU trade reviews, ensuring smooth compliance and minimising disruption.
7. Income Tax Rates and Personal Allowance
For the new tax year 2025/26:
- Personal Allowance: Remains at £12,570 across England, Wales, and Northern Ireland.
- Income Tax Bands: The personal allowance, the income an individual can earn before paying income tax, remains unchanged in the 2025/26 tax year.
- Basic Rate (20%): £12,571 to £50,270.
- Higher Rate (40%): £50,271 to £150,000.
- Additional Rate (45%): Over £150,000.
In Scotland, income tax bands differ, with rates ranging from 19% to 48%, reflecting the devolved government's fiscal policies.
Impacts on Your Business:
- No inflationary uplift = effective tax increase: Staff may feel financially squeezed, potentially impacting morale or pay rise expectations.
- Compensation package reviews needed: To remain competitive, especially for talent nearing higher tax thresholds.
How to Prepare:
- Reassess employee net pay outcomes under frozen allowances, and adjust remuneration strategies (e.g. salary sacrifice, bonuses, benefits) to maintain take-home pay competitiveness.
- Or, you could just contact Pulse. We help clients model post-tax salary strategies and restructure reward packages for maximum employee impact.
8. Making Tax Digital (MTD) Expansion
The MTD initiative continues to evolve:
- MTD for Income Tax: From April 2026, self-employed individuals and landlords with qualifying income over £50,000 will be required to comply. This threshold will reduce to £30,000 from April 2027.
- Penalties: Late payment penalties for MTD for VAT and MTD for Income Tax will increase from April 2025, emphasizing the importance of timely compliance.
Businesses should prepare for these changes by updating accounting systems and ensuring staff are trained on new requirements.
Impacts on Your Business:
- More admin for landlords and sole traders: Manual recordkeeping must be replaced with digital tools and quarterly reporting.
- Increased risk of fines if processes and training aren’t updated in time.
How to Prepare:
- Implement MTD-compatible software and train staff on digital record-keeping and new submission cycles—this is a significant overhaul for some businesses.
- Or, you could just contact Pulse. We manage MTD compliance from software setup to ongoing submissions, freeing you from admin headaches and penalty risk.
9. Business Rates Relief for Retail, Hospitality, and Leisure
The Government has confirmed that eligible businesses in the retail, hospitality, and leisure sectors will continue to receive 75% business rates relief specifically for the 25/26 tax year, up to a cash cap of £110,000 per business.
This measure is particularly beneficial for high street shops, cafes, restaurants, pubs, cinemas, and leisure centres still recovering from economic pressures and shifting consumer behaviour.
Key points:
- Relief applies to eligible occupied properties.
- Businesses must apply annually and adhere to subsidy control rules.
- Local authorities will manage applications and administration.
This relief will continue to provide substantial support for bricks-and-mortar businesses facing rising costs and changing footfall patterns.
Impacts on Your Business:
- Crucial cost savings for physical premises: Particularly vital for high street shops, pubs, cafes and leisure facilities.
- Lost savings if deadlines are missed or applications are incomplete
How to Prepare:
- Prepare and submit relief applications to your local authority, including necessary documentation and subsidy declarations.
- Or, you could just contact Pulse. We’ve helped clients secure maximum relief, stay within rules, and avoid admin delays or rejections.
10. Child Benefit and High Income Child Benefit Charge (HICBC)
A significant update for families comes in the form of reforms to the Child Benefit system, particularly the HICBC, which has long been criticised for penalising single-earner households.
From April 2025:
- The income threshold at which the HICBC applies rises from £50,000 to £60,000.
- The taper range (where the charge is gradually applied) increases up to £80,000.
- Families will retain more of their Child Benefit entitlement.
- From April 2026, the Government plans to move the HICBC assessment from individual to household income – a significant structural reform.
This change improves fairness and benefits middle-income families. Those previously deterred from claiming Child Benefit due to the tax charge may wish to reassess their eligibility and update their claim.
Impacts on Your Business:
- More employees may re-engage with Child Benefit: Particularly in single-earner families who previously opted out.
- HR and payroll queries will increase around tax codes, adjustments, and HMRC updates.
How to Prepare:
- Communicate the changes to employees and update benefit-in-kind policies, and advise those impacted to reassess their claims via HMRC.
- Or, you could just contact Pulse. We provide employee comms and payroll tax updates, and help staff navigate claims to avoid over or underpayments.
11. Dividend and Savings Allowance Changes
To help close the tax gap and generate additional revenue, the Government has reduced both the Dividend Allowance and the Personal Savings Allowance thresholds:
- Dividend Allowance:
- Reduced from £1,000 to £500 for 2024/25.
- Expected to fall further to £0 by April 2026.
- Dividends above the threshold taxed at 8.75% (basic rate), 33.75% (higher), and 39.35% (additional).
- Savings Allowance:
- Remains £1,000 for basic rate taxpayers.
- £500 for higher rate taxpayers.
- £0 for additional rate taxpayers.
These changes will affect company directors, shareholders, and savers, as well as considerations around personal allowance. Tax-efficient wrappers like ISAs and pensions will become increasingly important to shelter income from tax.
Impacts on Your Business:
- Directors and shareholders face higher personal tax bills on dividends.
- Savers see lower tax-free interest, making cash planning less efficient.
How to Prepare:
- Review dividend extraction plans and consider switching to salary or pension contributions, or sheltering income in ISAs.
- Or, you could just contact Pulse. We help directors restructure their remuneration plans to remain tax efficient as allowances tighten.
12. Corporation Tax and Full Expensing
Corporation tax remains a central focus for companies in the new tax year.
- The main rate of Corporation Tax stays at 25% for profits over £250,000.
- Small Profits Rate of 19% applies for profits up to £50,000.
- Profits between £50,001 and £250,000 are subject to a tapered marginal relief calculation.
A major win for businesses is the permanent introduction of “Full Expensing”, allowing companies to deduct 100% of qualifying capital expenditure (e.g. on plant and machinery) from profits in the year of purchase.
Key implications:
- Encourages investment in productivity-enhancing assets.
- Applies only to companies liable for UK Corporation Tax.
- Does not cover assets bought for leasing.
This measure rewards growth and re-investment, particularly in the manufacturing, logistics, and tech sectors.
Impacts on Your Business:
- Tax savings on equipment purchases: Encourages reinvestment into operational improvements or expansion.
- Failure to claim = missed deductions that could lower corporation tax.
How to Prepare:
- Maintain detailed capex schedules and track eligibility under the Full Expensing regime—this includes tagging fixed asset purchases appropriately in your accounts.
- Or, you could just contact Pulse. We maximise capital allowance claims for clients and ensure your tax return reflects every available relief.
13. Inheritance Tax (IHT) and Gifting Rules
There has been no significant overhaul of Inheritance Tax, but families should remain alert to thresholds and planning opportunities:
- Nil-Rate Band remains frozen at £325,000.
- Residence Nil-Rate Band still £175,000 for direct descendants inheriting the family home.
- Combined allowance of £500,000 per person (or up to £1 million for couples).
Gifting allowances and exemptions continue unchanged:
- Annual Exemption: £3,000 per donor.
- Small Gifts Exemption: £250 per recipient.
- Seven-Year Rule for PETs (Potentially Exempt Transfers) remains in place.
Despite calls for reform, the freeze in thresholds means more estates are being drawn into IHT. Families should consider trusts, lifetime gifting, and other mitigation strategies as part of estate planning.
Impacts on Your Business:
- More estates liable to IHT due to frozen thresholds and rising property values.
- Family-owned businesses must plan carefully to avoid liquidity issues at inheritance time.
How to Prepare:
- Create or revisit an estate plan including lifetime gifting, use of trusts, and business succession strategies to mitigate IHT exposure.
- Or, you could just contact Pulse. We work closely with families and business owners to structure estates efficiently and protect generational wealth.
14. Self-Employed and Freelancers: NIC and Tax Simplification
The Government has made a small step toward simplifying taxes for the self-employed:
- Class 2 NICs abolished from 6 April 2025.
- Class 4 NICs: Reduced to 8% (from 9%) on profits between £12,570 and £50,270.
- Profits above £50,270 taxed at 2%.
While Class 2 contributions are scrapped, eligibility for State Pension and other benefits is preserved based on Class 4 NICs or voluntary contributions.
For many freelancers and sole traders, this will reduce both the admin burden and their NIC bill. However, the shift toward Making Tax Digital (MTD) for Income Tax will still present new compliance responsibilities over the next two years.
Impacts on Your Business:
- Lower NIC burden = slightly higher take-home pay
- Still need to manage new digital obligations under MTD
How to Prepare:
- Update your bookkeeping system and payment forecasts to reflect new NIC rates and calculate voluntary contributions where needed.
- Or, you could just contact Pulse. We help sole traders and freelancers streamline tax payments and stay ahead of NIC and MTD changes.
15. ISA and Pension Allowance Updates
ISAs remain a cornerstone of tax-free investing and saving, and for 2025/26:
- ISA Allowance remains at £20,000 per year.
- Junior ISA (JISA) allowance also remains at £9,000.
- A new UK ISA is proposed (launch TBC) with an additional £5,000 allowance for investing in UK-listed companies.
Pension Allowances:
- Annual Allowance remains at £60,000, but beware of tapering if income exceeds £260,000.
- Lifetime Allowance (LTA) has been fully abolished as of April 2024, simplifying pension rules significantly.
- Savers should now focus on Annual Allowance and ensure pension contributions remain within limits to avoid charges.
Tax-free growth and compounding within these wrappers are vital tools for long-term financial health.
Impacts on Your Business:
- Greater opportunity for tax-free saving – especially for directors and higher earners.
- New pension rules may cause confusion, especially around transitional protections and contribution limits.
How to Prepare:
- Review director and employee savings strategies and ensure pension contributions remain compliant, particularly where income exceeds £260,000 and tapering applies.
- Or, you could just contact Pulse. We advise clients on ISA/pension strategy, handle compliance, and optimise tax-free savings routes.
How These Changes May Impact Your Business
The updates for the 2025/26 tax year may have significant implications for your business operations, cash flow, and long-term planning. Whether you are a small business, a contractor, or an established enterprise, adjusting to these tax changes promptly can prevent disruptions in your financial processes.
For example, changes to National Insurance contributions, Capital Gains Tax, and the introduction of Full Expensing will affect how you manage profits, tax deductions, and investments in assets. It's essential to stay ahead of these shifts to remain compliant and optimise your business's tax position.
Whether you're a sole trader looking to understand the implications of Making Tax Digital, or a larger business needing assistance with the corporation tax changes, it’s important to engage with a professional who can help you navigate the evolving tax system and help your business grow.
Preparing for a Complex but Manageable Tax Year
The 2025/26 tax year introduces a range of changes that will affect nearly every taxpayer in some way. From adjustments in NICs and pension allowances to business-friendly reforms like Full Expensing and changes to business rates, this year offers both challenges and opportunities.
For individuals, families, and businesses alike, early preparation and professional guidance will be key to making the most of the evolving tax landscape. Taking the time to review the changes, reassess your financial strategies, and plan effectively can prevent unnecessary tax liabilities and ensure your business remains on track for success.
Start of the New Tax Year: Checklist for 2025/26
At the start of the new tax year, it’s wise to review your financial situation. Here's a tax checklist to help you get ahead:
- ✅ Review and use your ISA and pension allowances early.
- ✅ Check your tax code for accuracy.
- ✅ Submit or prepare your Self Assessment return (for 2024/25).
- ✅ Review your dividend and interest income against allowances.
- ✅ Employers: update payroll with new NIC and wage thresholds.
- ✅ Landlords: plan for MTD Income Tax rollout.
- ✅ Consider tax-efficient investments like VCTs or EIS.
- ✅ Review your benefits-in-kind or company car arrangements.
While this checklist can help you stay organised and highlight key areas to focus on, implementing these changes effectively — in a way that maximises your business's tax-efficiency and minimises the time you spend — is where expert guidance makes all the difference.
That’s where a client-focused accountancy firm like Pulse Accountants can step in.
How Pulse Accountants Can Help
At Pulse Accountants, we understand how complex the tax landscape can be. With the constant changes and new policies, staying on top of your business's tax obligations is vital. That's where we come in as a trusted financial adviser.
We can help by:
- Offering personalised tax advice tailored to your unique business needs.
- Ensuring your compliance with HMRC's latest rules and regulations, such as the changes to NICs, CGT, and MTD.
- Helping you minimise your tax liabilities with effective tax planning strategies, including Full Expensing, pension contributions, and capital gains planning.
- Supporting you through the Self Assessment process, making sure that your returns are submitted accurately and on time.
- And so much more to get your business in the best place in the 2025/26 tax year.
At Pulse Accountants, we foresee the challenges ahead and provide proactive solutions. Our team of experienced tax advisers and accountants is here to guide you through the intricacies of tax law and help you leverage every available opportunity to grow your business.
We are here to ensure your business’s tax efficiency, profitability, and compliance — so you can focus on what you do best. Complete this form to see how you can optimise your business accounts this tax year.