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Please contact us for advice in your own specific circumstances. We’re here to help! April 2025
· Several tax-related changes to take effect’
· Tax commitment finally set to change after 25 years’
· Hiring veterans: National Insurance relief extended for another year’
· Tax break scheme for second homeowners axed’
· April Questions and Answers’
· April Key Dates’
A number of tax changes are set to take effect in April, with National Insurance contributions for employers and a facet of Capital Gains Tax among them.
Employer NICs will rise from 13.8%, as it stands now, to 15% from 6 April 2025. And there are changes afoot for the Secondary Threshold – the point at which employers become liable to pay NICs on employees‘ earnings. This will go down to £5,000 a year from 6 April 2025 until 6 April 2028, dropping from the current rate of £9,100 a year.
The Employment Allowance will more than double, increasing from £5,000 to £10,500. This means that 865,000 employers will not pay any NI at all, according to Treasury figures. The Government is also scrapping the £100,000 threshold for eligibility, expanding it to all eligible employers with employer NICs bills from 6 April.
Some changes to Capital Gains Tax took effect immediately after the Budget in October. However, CGT that applies to The Business Asset Disposal Relief (BADR) and Investors‘ Relief (IR) rate rises from 10% to 14% from 6 April 2025. Residential property rates for CGT are not changing.
Although Inheritance Tax changes dominated the headlines in October and since, due to the impact on farmers, these will not kick in until 2026. Many of the main aspects of IHT will remain the same. The first £325,000 of any estate will still be tax-free – or £500,000 if the estate includes a residence passed to direct descendants. The nil-rate band (currently £325,000) and the residence nil-rate band (£175,000) also remain the same. Furthermore, the residence nil-rate band taper will continue to start at £2 million.
Another change set to occur is an increase in the interest rate charged by HMRC on unpaid tax liabilities. This will rise by 1.5 percentage points as of 6 April. So, if the Bank of England base rate remains the same as it is now, the standard interest rate for most unpaid taxes will rise from 7% to 8.5%. Income Tax, VAT, and NI for employees will all remain the same, come April. Corporation Tax will continue to stand at 25%.
The one note of caution we‘d issue to all of the above is that there is a small chance some of these areas could be tinkered with at the Spring Statement on 26 March. However, based on everything we know at this point and what the Chancellor is saying, it appears very unlikely that any of these will change. There could be some tinkering with income tax thresholds for future years and changes to ISA rules, if media speculation proves to come true, but tax changes are expected to be limited when Rachel Reeves delivers her Spring update.
A 25-year UK tax commitment related to Income Tax is set to be axed from next month.
As the new tax year begins on 6 April 2025, rules on The Official Rate of Interest (ORI) are finally set to change. In January 2000 it was decided to not increase the rate during the tax year, and it has remained that way ever since.
HMRC is now highlighting the change through communications with businesses as we get near to the new tax year. The ORI is used to work out the Income Tax charge on the benefit of employment-related loans. It also applies to the taxable benefit of some employment-related living accommodation.
In terms of how it affects employers, HMRC officials stated the following: ‘If you provide employment-related loans or living accommodation to your employees, you will need to remain aware of any future changes in the rate. As of 6 April 2025, the rate may increase in-year which will impact the taxable value of the benefits you provide.”
This change was originally announced in the Budget in October 2024. The Budget papers stated: ‘The previous public commitment, made by the Inland Revenue in January 2000, that the rate will not increase in-year will no longer be applicable. As of 6 April 2025, the official rate of interest may increase, decrease, or be maintained throughout the year.
‘This measure will enable the official rate of interest to increase in-year where appropriate, ensuring employment-related beneficial loans and living accommodation are correctly valued.’
Changes to National Insurance contributions for employers have dominated much of the tax news headlines since being announced at the Autumn Budget.
But one element of the rules you may have missed concerns armed forces veterans. If you hadn‘t realised already, there is a relief that applies for businesses employing veterans. And this will apply for one year more at least, the Government has announced. So, the relief stays in place until April 2026.
Under this exemption, employers pay no employer National Insurance contributions up to annual earnings of the Veterans Upper Secondary Threshold of £50,270. To be eligible, employers must have served at least one day in the regular armed forces and completed at least one day of basic training. The relief applies for the first year of their job in a civilian capacity, regardless of when they left the military role.
If the employee leaves their job and then starts another within the qualifying 12-month period, that second employer can claim the relief as well during the set time. And if the veteran has more than one job during that same period, each business they work for can claim the relief.
The furnished holiday lettings tax regime is on the verge of being abolished.
Reforms were announced under the previous Conservative Government in Spring 2024 and are now set to take effect. The changes will come into force firstly for Corporation Tax and for Corporation Tax on chargeable gains from 1 April 2025. And then for Income Tax and for Capital Gains Tax on or after 6 April 2025.
Currently, the tax break makes it more profitable for second homeowners to let out their properties to holiday makers rather than to residential tenants to rent, raising concerns over the availability of long-term rental housing for local people. Multiple Dwellings Relief is also being abolished.
Beneficial tax treatment includes exemption from rules which restrict loan interest to the basic rate of Income Tax for other landlords. The capital allowances rules are also more beneficial. The changes will primarily affect any individual, corporation or trust who run or sell holiday lettings. The Government said the change ‘promotes fairness and aligns the tax rules for furnished holiday lettings with those for other property businesses.’
A:You’re right to identify there are relevant upcoming rule changes for people in your position. These alterations mean people who sell their businesses will have to pay more tax than before. The reforms in question surround the Capital Gains Tax rate and Business Asset Disposal Relief.
The latter is effectively a special discount on tax for people who sell their businesses. Instead of paying a high tax rate, they get to pay a lower tax rate on up to £1 million of their profits.
From 6 April 2025, the CGT rate under BADR is increasing from 10% to 14% on the first £1 million of lifetime gains. This means you‘ll pay more tax when selling your business (assuming it qualifies under the rules). Part of eligibility is that you‘ve owned it for at least one year, which is clearly fine in your case.
It sounds like your business will count as a qualifying business. It has to be one that you own and run yourself and must be trading – i.e. it sells goods or services to make money. It can‘t just be for investment, like renting out property.
Some mixed-use businesses also qualify. That is to say, your business does both trading (selling goods or services) and providing rental income, like a shop with an apartment above it.
The thing you should bear in mind is that, although the rules are less favourable now than if you‘d sold, for example, a year ago, you face paying even more if you delay a year. If you delay beyond April 2026, the rate looks likely to rise even further, bringing it closer to standard CGT rates of 18% or 24% for higher earners. In fact, it has already been stated in the Budget that it will rise again in April 2026 to 18%. If you‘re considering a sale, it may be worth reviewing your plans now to take advantage of the lower rate before it increases. If you‘d like to discuss the matter further, please get in touch with our team.
A: It’s certainly worth exploring what could be relevant here in terms of effective tax planning strategies.
Firstly, it would be beneficial to make your husband a partner. If your spouse or civil partner becomes a partner in your business, you can allocate some of the profits to them, potentially reducing the overall tax burden by using their lower tax rate. However, you must bear in mind that this should be a genuine business arrangement, and his share of profits should reflect his involvement in the business.
For anyone else reading this with similar questions, but operating a limited company rather than being a sole trader, it‘s perhaps worth mentioning that if your spouse is a lower-rate taxpayer, you could gift them shares. This could allow dividend income to be taxed at their lower rate. However, it‘s worth noting that HMRC may scrutinise this arrangement under the “settlements legislation” if the shares were given purely to divert income and avoid tax.
We should also consider that from April 2025, new rules will affect income allocation between spouses for jointly held property. While this doesn‘t directly impact business income, it highlights HMRC‘s ongoing focus on income splitting.
It‘s certainly worth delving into the details of your business and tax arrangements in greater depth with a professional before diving into making any changes. Please give our team a call if you‘d like to discuss this.
A: Yes, if your total monthly PAYE payments to HMRC are less than £1,500, you may be able to pay quarterly instead of monthly, which can help with cash flow.
However, this isn‘t automatic; you need to contact HMRC to arrange it. Keep in mind that even though payments are less frequent, you must still submit your payroll information on time under Real Time Information (RTI) rules. If your PAYE liability increases above £1,500 per month, HMRC may require you to switch back to monthly payments. It‘s worth calling the HMRC payments line to discuss this in full.
– Current tax year (2024/25) ends. That means it’s the final opportunity to use up any tax allowances or reliefs for that year, such as making pension contributions or ISA allowances.
6th
– New tax year begins (2025/26). Changes to tax rules, such as Capital Gains Tax (see above) and other measures announced in the latest Budget, will take effect.
19th
– For employers operating PAYE, this is the deadline to send an Employer Payment Summary (EPS) to claim any reduction on what you’ll owe HMRC.
22nd
– Deadline for employers operating PAYE to pay HMRC. This is also the quarterly deadline for businesses that pay per quarter.
30th
– Deadline for submitting the Annual Tax on Enveloped Dwellings (ATED) return and making the associated payment for the period covering 1 April 2025 to 31 March 2026.
Disclaimer
The information contained in this newsletter is of a general nature and no assurance of accuracy can be given. It is not a substitute for specific professional advice in your own circumstances. No action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a consequence of the material can be accepted by the authors or the firm.
