HMRC Tax Changes in April 2025 – What UK Businesses Need to Know
Introduction
As the new fiscal year begins in April 2025, UK businesses must prepare for several significant tax changes introduced by HMRC.
These adjustments will impact various aspects of business operations, including National Insurance Contributions (NICs), Employment Allowance, and the taxation of Furnished Holiday Lettings (FHLs). Understanding these changes is crucial for maintaining compliance and optimizing financial planning.
Employer National Insurance Contributions (NICs) and Employment Allowance
Increase in Employer NICs
Effective from April 6, 2025, the rate of employer NICs will increase by 1.2 percentage points, bringing it to 15%. Additionally, the threshold at which employers begin to pay NICs on an employee’s salary will decrease from £9,100 to £5,000.
Action Point –Businesses should review their payroll budgets to account for the increased NIC rates and lower thresholds. Consulting with a financial advisor can help develop strategies to manage these additional costs effectively.
Increase in Employment Allowance
Employment Allowance is a government initiative that allows eligible employers to reduce their annual National Insurance liability by a specified amount. This relief is applied each time you run your payroll until the full allowance is utilized or the tax year ends.
The Employment Allowance will increase from £5,000 to £10,500 starting April 2025. Furthermore, the previous restriction limiting the allowance to employers with NIC bills of £100,000 or less will be removed, making more businesses eligible for this relief.
Action Point – Employers should assess their eligibility for the increased Employment Allowance and adjust their payroll systems accordingly to benefit from the enhanced relief.
Abolition of Furnished Holiday Lettings (FHL) Tax Regime
From April 6, 2025, the preferential tax treatment for Furnished Holiday Lettings (FHL Scheme) will be abolished. This change removes the tax advantages that FHL landlords previously enjoyed over other residential property landlords, aiming to promote fairness in the property rental market.
Action Point – Owners of furnished holiday lets should review their property portfolios and seek professional advice to understand the financial implications of this change and explore alternative strategies.
Changes to Late Payment Penalties
Starting April 2025, HMRC will implement stricter penalties for late VAT & Income Tax payments:
Penalties:
- 3% of the outstanding tax if overdue by 15 days.
- An additional 3% if overdue by 30 days.
- 10% per annum for amounts overdue by 31 days or more.
Action Point – To avoid these penalties, ensure timely tax payments. Implementing efficient accounting systems and setting reminders for due dates can help maintain compliance.
Adjustments to Capital Gains Tax (CGT) under Business Asset Disposal Relief (BADR)
From April 6, 2025, the CGT rate under BADR will increase from 10% to 14% on the first £1 million of lifetime gains. From April 6, 2026 it will increase further to 18%.
Action Point – Business owners considering the sale of their business or assets should evaluate the timing of such transactions to benefit from the current lower rate before the increase takes effect.
Wrapping up
The tax changes commencing in April 2025 present both challenges and opportunities for UK businesses. Proactive planning and staying informed are essential to navigate these adjustments successfully. Engaging with financial advisors or tax professionals can provide tailored strategies to manage the impacts and ensure compliance.
Need Assistance? Our team of experts is ready to help you understand and adapt to these tax changes. Contact us today to ensure your business is prepared for the new fiscal landscape.
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Disclaimer: The information provided in this article is accurate as of April , 2025. Tax laws and regulations are subject to change. It is the responsibility of the reader to ensure that they are referencing the most current information and to seek professional advice as needed.
