With the 2025/26 tax year approaching, business owners, individuals, and investors alike are keeping an eye on upcoming changes in the UK tax landscape. Being proactive about these adjustments can help you avoid surprises and take advantage of any new opportunities. Here’s an overview of some of the most anticipated tax updates, plus tips on what you can do to prepare.

1. Personal Tax Allowances
The government’s freeze on personal tax allowances is expected to continue, meaning the personal allowance and higher-rate threshold may remain unchanged until 2028. As inflation boosts incomes, an increasing number of individuals may be pushed into higher tax brackets as a result of "fiscal drag."
What to Do: Review your income sources and consider tax-efficient investments like ISAs or pensions. If you’re nearing the higher-rate threshold, adjusting your contributions to these tax-free vehicles can help reduce your taxable income.
2. Dividend Allowance
The Dividend Allowance will remain at £500 for 2025/26.
What to Do: For shareholder-directors, this change makes it essential to review dividend strategies. Consider balancing dividends with salaries to maximise tax efficiency, or explore other ways to extract profit from your business while minimising tax.
3. Capital Gains Tax (CGT)
For the 2025/26 tax year, the UK government is introducing several important changes to Capital Gains Tax (CGT). These updates, effective across various stages, will mostly impact business assets, non-residential properties, and trusts. Here’s what to expect and how to prepare:
• Rate Increases for General Assets
As of October 30, 2024, CGT rates for non-residential assets will increase:
Basic rate: rising from 10% to 18%.
Higher rate: increasing from 20% to 24%.
These adjustments do not affect residential property CGT rates, which will stay at 18% for basic-rate taxpayers and 28% for higher-rate taxpayers.
• Business Asset Disposal Relief (BADR) & Investors’ Relief
Business Asset Disposal Relief (previously called Entrepreneur’s Relief) and Investors’ Relief will see staged increases in their CGT rates, specifically for individuals selling qualifying business assets:
April 6, 2025: Rates increase from 10% to 14%.
April 6, 2026: Rates rise again from 14% to 18%.
This is particularly relevant for those who planned to rely on these lower rates for tax efficiency when selling business assets. Early planning may be advantageous.
• Use of Annual Exempt Amount and Losses
Despite the rate hikes, taxpayers will still have access to existing provisions like the annual exempt amount, the option to offset losses, and the basic rate band for minimizing CGT liabilities. These adjustments can help offset gains effectively under the new rates.
What to Do: With these changes, now is a good time for business owners, investors, and trustees to revisit their CGT strategies. Understanding how these changes affect future transactions could help in timing disposals, structuring sales, or exploring reliefs to mitigate higher CGT liabilities.
4. National Insurance Contributions (NICs)
The Employer National Insurance Contributions (NICs) rate in the UK will rise from 13.8% to 15%. This increase also applies to Class 1A and Class 1B NICs, covering benefits in kind and certain termination payments. Additionally, the earnings threshold where employers start paying NICs (the “secondary threshold”) will drop from £9,100 to £5,000. In practical terms, this means employers will owe NICs on a larger portion of their employees' earnings.
To help small businesses manage this, the government is increasing the Employment Allowance from £5,000 to £10,500. This boost is aimed at reducing NIC costs, particularly for companies with annual NIC bills under £100,000, providing some relief for smaller employers facing higher employment costs.
What to Do: Now is a good time to review salary and benefit arrangements to ensure they’re as tax-efficient as possible.
6. The Digital Tax Transformation Continues with MTD ITSA
Making Tax Digital (MTD) is on its way for Income Tax Self-Assessment (ITSA) from April 2026, requiring sole traders and landlords earning over £10,000 per year to file digitally. Although it’s not a tax rate change, it’s a significant shift in how taxpayers report income.
What to Do: Start exploring MTD-compliant software options and get familiar with digital bookkeeping if you haven’t already. Ensuring compliance early on can help avoid potential penalties when MTD ITSA takes effect.
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