The new financial year

As the new tax changes, announced in the October budget, come into force today (April 1^st), it is important that business owners and high-net-worth individuals understand what has changed.

Here is some insight into those changes, and how best to move forward into the 2025/26 financial year.

 

For businesses

The increasing employer national insurance contribution (NIC) is a blow to many businesses across the UK, and one that was not expected when the budget was announced back in October 2024. Employer NICs have risen from 13.8% to 15% on salaries above £5,000. It is also important to note that the threshold for contributions has dropped to £5,000. One small light at the end of the tunnel is the increased employment allowance (EA), which has risen from £5,000 to £10,500. These are additional pressures that businesses, which are already facing increased costs and reduced profits, could do without. Another element to consider is the increase in national minimum wage, which has risen by 6.7%, meaning the rate for over-21’s will increase to £12.21 per hour.

Businesses with electric vehicles (EVs) should be aware that the vehicle excise duty (VED) exemption has come to an end, with electric cars paying a first-year rate of £10. That is unless the vehicle was priced over £40,000, in which case the owner will also face the ‘Expensive Car Supplement’, currently standing at £410. It is important to review other business vehicles, as taxes will also rise dependent on CO2 emission levels.

For anyone looking to pass a business down, or sell it, changes to the Business Property Relief (BPR) means that only the first £1 million of qualifying assets will receive 100% tax relief, with anything above being taxed at 50%. This adjustment is not coming into play until 2026, so it is important to review strategies and put plans into action. We expect that many business owners will delay the sale of a business, likely waiting to see if any new measures are introduced in the future to ease the blow.

Those who claim dividend taxes should be aware that the annual tax free allowance will remain at £500, following a reduction from £1,000 in the 2024/25 financial year.

 

For high-net-worth individuals

The biggest change for high-net-worth individuals that has come into play this month is the abolition of the non-dom status, which is being replaced by a residence based regime, bringing foreign earnings into the UK tax system. Under the new regime, there will be ‘100% relief on foreign income and gains for new arrivals to the UK in their first 4 years of tax residence, provided they have not been a UK tax resident in any of the 10 consecutive years prior to their arrival’⁽¹⁾. For current residents, non-UK assets will now be included in inheritance tax and capital gains tax, with foreign income being taxed from the 4^th year onwards.

Stamp duty thresholds across England have also decreased, with the previous threshold of £250,000 reduced back to £125,000. Although it was known that the increase was only a temporary measure introduced back in 2022, many people will likely still be unprepared for the financial burden.

From the 6^th April, inheritance tax is also changing. This means if the person has been a resident in the UK for 10 out of the last 20 years immediately preceding the tax year of death, or transfer of assets, IHT will apply to worldwide assets. There are also changes to inheritance tax relief, with a cap on business and agricultural property reliefs being set at £1 million for full relief and amounts in excess will be subject to a 50% relief rate.

Although it is not coming into play in April 2025, it is important to note that from 2027, pensions will also be included in the estate for inheritance tax purposes.

The basic rate of capital gains tax (CGT) has risen to 18%, and the higher rate has gone up to 24%, meaning increased liabilities on the sale of assets. For the 2025/26 tax year, the annual exemption allowance will remain at £3,000. For disposals made on or after 6^th April 2025, the business asset disposal rate (BADR) will rise from 10% to 14%, and then on 6^th April 2026 it will increase again to 18%.

These major tax changes will certainly impact businesses, SMEs and high-net-worth-individuals across the UK. And while many will have prepared following the October 2024 announcement, it is important to take proactive steps to help reduce, and where possible mitigate, the blow.

At Turner Little, we have decades of experience in developing bespoke strategies for businesses, entrepreneurs and high net worth individuals. Understanding the most appropriate business structure in the best location is essential to minimise tax liabilities and create growth opportunities. Please get in touch to learn more about our Discovery service, to review your current situation and create a bespoke wealth and asset protection strategy.

 

1. https://www.gov.uk/government/publications/tax-changes-for-non-uk-domiciled-individuals/reforming-the-taxation-of-non-uk-domiciled-individuals