The new tax year will bring about many changes for everyone in the UK, whether you are a sole trader, limited company, employer, or so on. This article aims to highlight some key features that will affect many UK taxpayers, so have a scroll and see what's changing for you.
Lower National Insurance Rates for Employees and Self-Employed.
Our "Pay Less Tax in 2024" article highlighted the changes being made to National Insurance (NI). The final rate adjustments start on 6 April 2025. These are:
Class 1 NI cut down to 8% from 10% for employees
Class 4 NI cut down to 6% from 9% for self-employed
Removal of Class 2 NI for self-employed
It's worth mentioning that earnings above £50,270 will still incur the standard 2% class 4 NI for self-employed taxpayers. For specific examples of how much extra money this will leave in your pocket, please see our article "Pay Less Tax in 2024."
Increase in Employer National Insurance Contributions
From 6 April 2025 the employer NICs rate will rise from 13.8% to 15%. Also, the Secondary Threshold will decrease from £9,100 to £5,000 per year, which means employers will start contributing NICs on employee earnings above £5,000, increasing their overall NIC liability.. Becaause of this payroll costs will increase for employers, making it essential to budget accordingly.
Increase in the Employment Allowance
To mitigate the impact of the above increase on smaller businesses, the Employment Allowance will increase from £5,000 to £10,500. Additionally, the £100,000 eligibility threshold will be removed, allowing more employers to benefit from this allowance.
Adjustments to Business Asset Disposal Relief (BADR) and Investors’ Relief
The CGT rate for qualifying disposals under these reliefs will increase:
From 10% to 14% for disposals made on or after 6 April 2025.
From 14% to 18% for disposals made on or after 6 April 2026.
Also, the lifetime limit for Investors’ Relief has been reduced to £1 million for disposals made on or after 30 October 2024, aligning it with the existing limit for BADR.
And a new single CGT rate of 32% will apply to carried interest arising on or after 6 April 2025.
Statutory Pay Increases
From 6 April 2025, statutory pay rates will increase:
Statutory Sick Pay (SSP): £118.75 per week.
Maternity, Paternity, and Parental Leave Pay: £187.18 per week.
National Minimum Wage (NMW) & National Living Wage (NLW) Increases
National Living Wage (Aged 21 and above): The hourly rate will increase by 6.7% to £12.21, up from £11.44.
Aged 18 to 20: The hourly rate will rise by 16.3% to £10.00, an increase from £8.60.
Aged under 18 and Apprentices: Both categories will see an 18% increase in their hourly rate to £7.55, up from £6.40.
Businesses should review employee wages to ensure compliance.
These are the main changes that we think will affect many taxpayers. We always aim to keep on top of the changing tax world so that we never miss a trick when it comes to helping out our clients. If you want to have confidence in your accountant please get in touch and join us today!