New Tax Year, New Rules: Key Changes for Businesses and Landlords in 2025/26

The arrival of a new tax year often brings fresh adjustments and new regulations, requiring businesses and landlords to stay vigilant and prepared. To help you smoothly adapt to the changes coming into effect from April 2025, we’ve highlighted the most critical updates to keep you informed and compliant.

Key Highlights

• Employers’ National Insurance (NI) will apply to more earnings, though some relief is available through increased allowances.
• Late payment penalties and interest rates are rising significantly to discourage delayed payments to HMRC.
• Furnished Holiday Lets (FHLs) are no longer treated differently from standard long-term rentals for tax purposes.

1. Changes Effective from 1st April 2025

Increased Minimum Wage Rates:

• Adults aged 21 and over will now earn a National Living Wage of £12.21 per hour.
• The National Minimum Wage for individuals aged 18-20 rises to £10 per hour.
• Minimum wages for under-18s and apprentices increase to £7.55 per hour.

Reduced Business Rates Relief:

• Retail, hospitality, and leisure (RHL) properties in England will see business rates relief reduced to 40%.
• The relief cap per business will now be set at £110,000.

2. Changes Effective from 6th April 2025

Employer’s National Insurance Contributions:

• Employers must now pay NI at a higher rate of 15% on employee earnings over £5,000.
• The Employment Allowance has increased to £10,500, helping to offset this increased burden, provided your business is eligible.
• The previous £100,000 cap on employers’ NI bills for eligibility has been removed.

Increased Capital Gains Tax (CGT):

• The lower rate of CGT for Business Asset Disposal Relief and Investors Relief increases to 14%.
• CGT on carried interest payments received by fund managers increases to 32%.

Harsher Penalties for Late MTD Payments:

• Penalties for Making Tax Digital (MTD) VAT payments overdue by 15-29 days rise to 3% of the outstanding amount.
• Payments overdue by 30 days or more incur an additional 3%, plus a 10% annual penalty.

Late Payment Interest Rates:

• Interest rates for late payments to HMRC will increase significantly to the Bank of England base rate plus 4%, equating to 8.5%.

New Company Size Thresholds:

• Financial reporting thresholds have increased, allowing over 100,000 UK companies to benefit from less stringent reporting and auditing requirements:

Furnished Holiday Lets Lose Special Status:

• FHLs no longer enjoy separate tax treatment, losing eligibility for CGT relief, capital allowances, and certain expense claims such as heating or cleaning. They may also be subject to Council Tax instead of business rates.

3. Other Considerations for the 2025/26 Tax Year

Small Business Rates Multipliers Frozen:

• The small business multiplier for calculating business rates remains fixed at 49.9p until 2026, although substantial changes may come thereafter to level the playing field with online competitors.

MTD for Income Tax Approaches:

• From April 2026, self-employed individuals and landlords with incomes over £50,000 must adopt MTD for Income Tax, maintaining digital records and submitting quarterly updates. Those with incomes over £30,000 and £20,000 will follow in April 2027 and 2028, respectively.

Fuel Duty Freeze Extended:

• The 5p cut in fuel duty is extended until March 2026.

Growth Guarantee Scheme Ending:

• The Growth Guarantee Scheme (previously Recovery Loan Scheme) supporting business loans is set to conclude in March 2026.

Stricter Government Payment Terms:

• From October 2025, businesses seeking government contracts over £5 million must prove they settle invoices within an average of 45 days.

No Change to Personal Tax Rates:

• Income Tax, VAT, and personal National Insurance rates will remain unchanged, with tax thresholds frozen until 2028.

Preparing for the New Financial Year

The 2025/26 tax year introduces several important updates that businesses and landlords need to be prepared for to ensure compliance and optimal financial planning. Staying informed and acting proactively will be key to successfully navigating these changes.

At BM & Co Accountants, we’re here to support you through these shifts, ensuring your business adapts smoothly. If you need expert guidance to manage these updates, don’t hesitate to reach out—we’re always here to help.