The beginning of a new tax year is the perfect time to review both your personal and business finances, ensuring you maximise your annual tax-efficient opportunities for the year ahead.
While many allowances simply reset, chancellor Rachel Reeves introduced several important changes to taxes and reliefs for businesses in the Autumn Budget last year. Some of these changes are already in effect, while others will be implemented starting 6 April. There are also several minimum and statutory payments set to increase.
Although many businesses may face higher taxes due to the upcoming changes, a financial planner can help minimise the impact.
Read on to discover four key changes in the new tax year that could affect your business.
1. Employer National Insurance contributions are set to rise, and there will be adjustments to certain reliefs
The headline announcement from the Autumn Budget was the decision to increase employer National Insurance contributions (NICs) from 13.8% to 15%. Reeves also announced a reduction in the earnings threshold at which employers begin paying NICs (the “secondary threshold”), lowering it from £9,100 to £5,000.
According to government estimates, these changes are expected to generate between £23.8 billion and £25.7 billion annually.
To help ease the burden on smaller businesses, the annual Employment Allowance – which provides NICs relief – will rise from £5,000 to £10,500. Additionally, the £100,000 total employer NICs threshold, which previously prevented larger businesses from claiming the allowance, will be abolished. As a result, more businesses, including those with higher NICs liabilities, will now qualify for the relief.
Despite these mitigating measures, the increase in NICs could still impact your business’s net income. So, now may be an opportune time to explore salary sacrifice options to help reduce your overall wage bill.
A financial planner can help you assess the impact of the NICs changes on your business and explore salary sacrifice strategies – such as pension contributions – to find the most effective approach for both your company and employees.
2. Capital Gains Tax has increased, and changes to business reliefs are on the way
Capital Gains Tax (CGT) rates on non-property holdings rose on 30 October 2024, with the basic rate increasing from 10% to 18% and the higher rate from 20% to 24%.
Further changes are set to take effect in April, including an increase in the Business Asset Disposal Relief (BADR) rate, which provides a lower CGT rate when selling or disposing of a business or its assets. The BADR rate will rise from 10% to 14% on 6 April, with a further increase to 18% planned for 2026.
Additionally, the lifetime limit for Investors’ Relief – which reduces CGT on the sale of shares in unlisted companies – was reduced from £10 million to £1 million in October. The Investors’ Relief rate will also increase in line with the BADR.
With CGT rates already higher and reliefs becoming less generous, you could face a significantly larger tax bill when selling your business or assets.
A financial planner can help you structure and time any sales to maximise tax efficiency, ensuring you retain more of your proceeds.
3. Minimum and statutory payments are set to increase
From 6 April, the National Living Wage (NLW) will increase from £11.44 to £12.21 an hour, equating to an annual pay rise of approximately £1,400 for a full-time employee.
Other statutory payment increases include:
- The National Minimum Wage (NMW) for 18- to 20-year-olds rising from £8.60 to £10 an hour
- Apprentices’ wages increasing from £6.40 to £7.55 an hour
- Statutory Sick Pay (SSP) rising from £116.75 to £118.75 a week
- Statutory Maternity Pay (SMP), along with paternity, adoption, shared parental, and bereavement pay, increasing from £184.03 to £187.18 a week.
These wage hikes, combined with the upcoming changes to NICs, could lead to a significant rise in business costs.
A financial planner can help you explore salary sacrifice arrangements to manage your wage bill more effectively while ensuring your employees continue to receive valuable workplace benefits.
4. Further changes are scheduled to take effect in April
From April 2025, several key changes will impact businesses, including adjustments to business rates relief.
Since 2020, retail properties have benefited from a 75% business rates discount, capped at £110,000. However, this relief is set to expire in April 2025.
While Rachel Reeves has introduced a 40% business rates relief for the retail, hospitality, and leisure sectors for 2025/26, the reduction from 75% to 40% means many businesses could see their rates nearly double.
Other notable business tax updates include:
- Fuel duty remaining frozen
- Corporation Tax staying at 25%
- The abolition of non-dom status, replaced by a residence-based tax regime with a transition period for wealth relocation to the UK.
Understanding how these changes will affect your business can be complex, but a financial planner can help assess the impact and develop strategies to manage costs effectively.
A financial planner can help you navigate the upcoming changes and reforms
As the upcoming changes are expected to lead to higher tax bills for many businesses, a financial planner can help your business stay resilient by identifying strategies to strengthen your position.
To speak to a financial planner, get in touch.
Email info@blueskyifas.co.uk or call us on 01189 876655.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate tax planning.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.