The end of the tax year approaches and as ever, there are some changes for ahead for 2025/2026. Need reminding? Let’s dive in to some of the main points.
Employer’s NI
The headline news is that Employer’s NI is rising from 13.8% to 15%. This will need to be considered throughout the supply chain, so if you haven’t started already, now is a good time to start discussions about how this cost might be factored in.
In addition, the threshold for when employers need to start paying the tax on employee earnings will be lowered from £9,100 a year to £5,000 to year.
There will also be an increase in the Employment Allowance from £5,000 to £10,500. Currently, this allows businesses with employer NI bills of £100,000 or less in the previous tax year to deduct £5,000 from their bill - changing to £10,500 from April.
National Minimum Wage/Living Wage
As of the The National Living Wage for those aged 21 or older is rising from £11.44 an hour to £12.21 (a rise of 6.7%). The National Minimum Wage will also go up for those aged between 18-20 from £8.60 an hour to £10 an hour.
Again, it is imperative that these changes are being factored into discussions and calculations in your supply chain.
Please note that the NLW and NMW will increase as of the 1st April, not the start of the financial year. Therefore, work done week ending the 6th April 2025 can continue as a whole (as the 1st falls mid-week) on the current contract rates. However, work done week commencing 7th April 2025 MUST reflect these increases (payable on the 18th April)
Employee Personal Allowance
This remains the same – ‘frozen’ – at;
£242 per week
£1,048 per month
£12,570 per year
As this hasn’t risen with inflation, this will increase workers’ taxable income without the base tax rates increasing. Also known as ‘fiscal drag’, by not increasing the value of tax thresholds, more income is generated for the government.
Changes to Company Size Thresholds
Previously outlined in the Companies Act of 2006, the definition of a ‘small business’ will change. This will also apply for the purposes of the off payroll working (IR35) rules.
As of April 6, 2025, a small company in the UK will have;
A turnover of less than £15 million (previously £10.2 million)
A balance sheet of less than £7.5 million (previously £5.1 million)
Less than 50 employees (remains at 50)
Medium sized businesses who engage workers via a LTD Company may be interested in the forthcoming changes, as the changes in threshold could mean that they will no longer be responsible for determining the worker’s IR35 status. A reminder that a small company ceases to be small if it fails to meet the small company definition for two consecutive financial years, so while the practical impact of this change will yet to be seen for a while, it is worth taking note of.
Pension changes
In line with the so-called ‘triple lock’, both pension types will rise.
The full new state pension will go up from £221.20 to £230.25 a week, and the full basic state pension will increase from £169.50 to £176.45 per week.
Stamp duty
The current extra stamp duty relief for first-time buyers and home movers in England and Northern Ireland is set to end on 31 March 2025. From 1 April, the stamp duty threshold for first-time buyers will drop from £425,000 to the previous rate of £300,000.
From the same date, home movers will pay stamp duty on purchases over £125,000, rather than the current £250,000.
Reminder – these vary in Wales (the Land Transaction Tax) and Scotland (Land & Buildings Transaction Tax) so check locally.
Inheritance tax freeze
If your estate is worth more than £325,000, your beneficiaries will be liable to pay inheritance tax of 40% on anything above this threshold. The threshold rises to £500,000 if the estate includes a residence passed to direct descendants, and up to £1m when a tax-free allowance is passed to a surviving spouse or civil partner.
The current IHT thresholds were due to be frozen until 2028, but this has been extended until 2030. As time goes on, the impact of inflation means that more estates are likely to exceed the frozen IHT threshold.
Additionally, unspent pension funds will count as part of an estate for IHT purposes from April 2027.
Contact us if you require any more information - we're here to help.
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