Key Tax Changes

There are some key tax changes that came into effect in April 2025, to be aware of:

Employer National Insurance Contributions (NICs):

Employers are facing an increase in NICs, the rate having increased from 13.8% to 15%.

In addition, the threshold to start paying also dropped from £9,100 to £5,000.

However, the Employment Allowance, which many smaller employers can claim, rose from £5,000 to £10,500, offering some relief.

Stamp Duty:

The temporary cut in Stamp Duty Land Tax (SDLT) ended on 31 March 2025. The threshold for relief for first-time buyers has dropped from £425,000 to £300,000, with the maximum price available for relief being £500,000.

HMRC Payments:

From 6 April 2025, the official interest rate charged when tax payments are made late has increased from 7% to 8.5%.

Self-Employed Reporting:

From 6 April 2025, for those taxpayers who start or stop trading, it will be compulsory to report these changes on their self-assessment tax return.

Company Directors' Reporting:

Directors of close companies (generally defined as one controlled by five or fewer participators) must now report their dividend income separately to other investment income on their self-assessment tax return and give details of their shareholding percentage, and company details.

Car Tax (Vehicle Excise Duty - VED):

Starting in April 2025, significant changes to Vehicle Excise Duty (VED), or car tax will take effect:

Electric Vehicles (EVs):

New EVs registered from 1 April 2025 will face a first-year VED of £10.

After the first year, they will incur the standard annual rate of £195.

Expensive EVs (those priced over £40,000) will attract an additional £425 per year for the first five years.

Petrol and Diesel Vehicles:

First-year VED rates for petrol and diesel vehicles will increase, especially for those emitting 76g/km of CO₂ and above.

Annual rates for these vehicles will also increase, based on their CO₂ emissions.

Hybrid Vehicles:

Plug-in hybrids with emissions between 1-50g/km will see first-year VED rise from £10 to £110.

Vehicles emitting 51-75g/km will face a £130 first-year VED.

Capital Gains Tax (CGT):

The lower rate of CGT has increased from 10% to 18%, and the higher rate has risen from 20% to 24%. The rate applicable to Business Asset Disposal Relief and Investors' Relief has also increased from 10% to 14%, with a further increase to 18% in 2026.

Furnished holiday lettings (FHLs):

The tax advantages for FHLs has been abolished from 1 April 2025 for companies and 6 April 2025 for other businesses.

Changes to non domiciled (non-dom) Tax Status:

The "non-dom" tax status has been scrapped from April 2025. This means that long-term UK residents who, for tax law are deemed to have their permanent home outside of the UK, will now have to pay tax here on their global income, not just UK earnings.

Agricultural Property Relief:

The scope of Agricultural Property Relief (APR) for Inheritance Tax has expanded to include land managed under environmental agreements, which will allow tax relief even if the land is temporarily or permanently taken out of agricultural production for environmental purposes.

Council Tax:

Increases in council tax rates from 1 April 2025 have been reported as being an average of 5% in England. It is worth checking if you are eligible for any discounts (e.g., living alone gives a 25% discount), or challenging your council tax band if your property may be in a band which is too high.

These tax changes could have a significant impact on some taxpayers. Please review your situation and talk to us about your particular circumstances. We are here to help.