Navigating the 2025/26 UK Tax Landscape: Key Changes for Businesses and Individuals
As we progress through the 2025/26 tax year, significant fiscal reforms introduced by Chancellor Rachel Reeves are reshaping the UK’s economic environment. These changes impact businesses, landlords, and individuals alike. Staying informed is crucial to ensure compliance and effective financial planning.
1. Employers’ National Insurance Contributions (NICs) Increase
Effective from 6 April 2025, the rate of employers’ NICs has risen from 13.8% to 15%. Additionally, the threshold at which employers begin to pay NICs has decreased from £9,100 to £5,000 per year. This adjustment affects nearly one million employers, increasing their NIC liabilities for the year.
2. Mandatory Adoption of Cash Basis Accounting for Self-Employed and Partnerships
From the 2024/25 tax year, self-employed individuals and partnerships are automatically required to use the cash basis for calculating profits. This method records income and expenses only when money changes hands, simplifying accounting. Benefits include full interest expense claims and more flexible loss relief options.
3. VAT Registration Threshold Increase
As of April 2025, the VAT registration threshold has increased from £85,000 to £90,000. Businesses with annual turnovers below this new threshold are no longer required to register for VAT, reducing administrative responsibilities and compliance costs.
4. Stamp Duty Land Tax (SDLT) Threshold Reduction
From 1 April 2025, the SDLT threshold for primary residences in England and Northern Ireland has reverted from £250,000 to £125,000. The first-time buyer threshold has also decreased from £425,000 to £300,000. These changes mean more property purchases will now attract SDLT, increasing the overall cost of buying a home.
5. Inheritance Tax (IHT) Planning for Non-Residents
New rules have prompted some wealthy Britons to adopt a “10 years out, 9 years in” residency pattern to mitigate IHT liabilities. Under these rules, individuals who live abroad for ten years become exempt from IHT but only remain so for nine years after returning to the UK. This has led to more strategic and sometimes complex financial planning.
6. Business Insolvency Risks Amid Economic Pressures
Recent data suggests that over 45,000 UK businesses are in critical financial distress, a significant increase from the previous year. Sectors such as retail, hospitality, and construction are particularly affected. Rising costs from tax hikes, NIC increases, and minimum wage adjustments have intensified the pressure, and experts warn of potential widespread insolvencies if economic conditions do not improve.
7. Future Tax Policy Considerations
Despite pledges not to raise income tax, VAT, or national insurance, there is increasing speculation that further measures may be needed to balance public finances. Proposals such as new taxes on rental income have been suggested. The government’s autumn budget will be closely watched for any significant announcements.
Conclusion
The 2025/26 tax year brings substantial changes that businesses and individuals must understand and prepare for. Whether it’s adjusting payroll processes, reviewing VAT obligations, or planning for property or inheritance taxes, taking proactive steps now is essential.
If you would like tailored advice or support on any of these matters, please get in touch with our team. We’re here to help you stay compliant and make informed financial decisions.