As we near the end of the 2024/2025 tax year, you should already be thinking about the changes ahead for 2025/2026. Whether you’re an individual or business owner, staying informed and planning for the new tax year is crucial to optimise your finances and minimise tax liabilities. The UK tax landscape is subject to regular adjustments, and we’re here to guide you through the key changes that will affect you.
Key Tax Changes for 2025/2026 in the UK: What you need to know
1. Changes to Tax Bands and Rates in the UK
For the 2025/2026 tax year, income tax bands and National Insurance Contributions (NICs) are expected to be adjusted to keep pace with inflation. Here’s what to anticipate:
- Income Tax Bands: The personal allowance remains fixed at £12,570. While rates are generally stable, higher earners may see slight adjustments to the 40% and 45% tax bands.
- National Insurance Contributions: The thresholds for NICs could change, which may impact both employees and employers. It’s important to stay updated on adjustments for Class 1 (employees), Class 2 (self-employed), and Class 4 (self-employed business owners) contributions.
2. Corporation Tax Changes for UK Businesses
Corporation Tax is tax that businesses pay on their profits and it’s an important area for businesses to monitor as we head into the new tax year:
- Corporation Tax Rate: The UK’s Corporation Tax rate remains at 25% for businesses with profits over £250,000, while businesses with profits under £50,000 continue to pay the lower 19% rate. Businesses with profits between these thresholds will be subject to a subsided rate.
- Small Profits Rate: Small businesses with profits under £50,000 will continue with the lower 19% tax rate, providing financial relief, particularly for start-ups.
3. Changes to VAT Thresholds and Rates
If your business is approaching or exceeding the VAT registration threshold of £85,000 in taxable turnover, you’ll need to prepare for VAT registration:
- VAT Registration Threshold: Businesses with a taxable turnover exceeding £85,000 must register for VAT, impacting cash flow, invoicing, and financial reporting.
- VAT Exemptions and Reduced Rates: Some industries, including healthcare and education, may benefit from VAT exemptions or reduced rates. Make sure to assess if your business qualifies for these benefits.
4. Changes to Employee Benefits and Pensions
Changes to employee benefits, pensions, and National Insurance are essential for employers to monitor:
- Pension Contribution Limits: Adjustments to pension contribution limits may allow businesses to make higher, tax-efficient contributions to employees’ pensions.
- Salary Sacrifice Schemes: These schemes, which allow employees to exchange salary for benefits like additional pension contributions, childcare vouchers, and more, may undergo changes that affect both employers and employees.
5. Impact of Tax Changes in Northern Ireland
While Northern Ireland generally follows UK tax rates, there are specific considerations if you operate across both Northern Ireland and the Republic of Ireland:
- Income Tax and NICs: Expect minor adjustments to income tax bands and NICs, in line with the rest of the UK.
- Cross-Border Tax Issues: If your business spans both Northern Ireland and the Republic of Ireland, stay informed about cross-border tax issues to ensure compliance with both jurisdictions.
Stay Ahead of Tax Changes with BeyondHR’s Advice
It’s important to start preparing now to avoid last-minute stress. Here is BeyondHR’s advice on how you can navigate these changes:
- Review Your Financials: Assess your income, expenses, and tax filings to ensure you’re prepared for any changes in tax rates or deductions.
- Adjust Your Budget: Adjust your budget to reflect changes in income tax rates, NICs, and pension contributions.
- Stay Informed: BeyondHR can keep you updated on official government announcements regarding tax changes, ensuring you meet all deadlines and stay compliant with the latest regulations.