Businesses need to be prepared to adapt to a fast-evolving tax landscape. Here are the key changes you can expect in 2025 and beyond, and how to prepare for them.
Employment tax
From April 2025, the rate of Employer National Insurance Contributions (NIC) will increase from 13.8 per cent to 15 per cent. Additionally, the current salary threshold for Employer NIC – £9,100 – will be reduced to £5,000.
These higher tax obligations will have a significant impact on all businesses. Budget cuts, payroll reviews, and investment reductions must be expected, and businesses must review their current workforce and salary bands.
Utilising alternative staffing methods (such as outsourcing or part-time roles) could lessen the taxable liability.
Companies must also calculate the potential impact on their cashflow so that they can adjust budgets and forecast cost cutting measures.
Business Asset Disposal Relief (BADR)
A major change for businesses this year is the rate of relief for BADR. While business owners currently pay tax at 10 per cent on the first £1 million of qualifying gains under BADR, this rate will rise to 14 per cent from 6 April 2025.
Business owners should also keep in mind that the BADR rate is set to increase further to 18 per cent from 6 April 2026.
For those disposing of a business worth £1 million or more, this could mean an increase of up to £40,000 in their tax liability.
If you are planning to sell a business over the next 12 to 18 months, you may wish to accelerate this transaction before the 18 per cent rate applies.
Making Tax Digital (MTD) for Income Tax
By 2026, individuals with income above £50,000 will need to comply with MTD for Income Tax and Self-Assessment (ITSA). This threshold will drop to those with income above £30,000 by 2027.
Although MTD is a phased extension and transition, taxpayers must start considering it now.
The transition will require significant upgrades in record-keeping, and the task of seamless data integration will fall on taxpayers, with little support from HM Revenue & Customs (HMRC).
Businesses must upgrade their software and educate themselves on MTD to avoid last minute compliance issues.
Inheritance Tax
Businesses should also start preparing for the changes to Inheritance Tax (IHT) set for 2026 and 2027.
For example, a £1 million limit to business property relief (BPR) and agricultural property relief (APR) 100 per cent tax relief (with relief 50 per cent thereafter) will come into effect from 6 April 2026. Pensions will also be brought into IHT from 6 April 2027.
Final thoughts
All businesses will need to adapt rapidly to ride the wave of tax changes in 2025. Tax professionals can help you to explore tax-efficient strategies and ensure your compliance with the new obligations.
Get in touch with our team for tailored tax advice and support.
