The 2025 tax year introduces several significant changes that will impact both individuals and businesses across the UK. From updated tax bands to new reliefs and allowances, staying informed about these changes is essential for effective tax planning and compliance.

Changes for Individual Taxpayers

Income Tax Thresholds

The personal allowance for 2025-26 remains frozen at £12,570, continuing the policy implemented in previous years. However, there are important changes to the tax bands:

  • Basic rate (20%): £12,571 to £50,270
  • Higher rate (40%): £50,271 to £125,140
  • Additional rate (45%): Over £125,140

Capital Gains Tax Updates

Significant changes have been made to Capital Gains Tax (CGT) allowances and rates:

  • Annual exempt amount reduced to £3,000 (from £6,000 in 2024-25)
  • Residential property CGT rates remain at 18% and 28%
  • New reporting requirements for property disposals over £30,000

Pension Contribution Changes

The annual allowance for pension contributions has been adjusted:

  • Standard annual allowance: £60,000 (increased from £40,000)
  • Tapered annual allowance threshold: £260,000
  • Money purchase annual allowance: £10,000

Business Tax Changes

Corporation Tax Rates

Corporation tax rates for 2025 continue with the tiered structure:

  • Small profits rate (19%): Profits up to £50,000
  • Marginal rate: Profits between £50,000 and £250,000
  • Main rate (25%): Profits over £250,000

R&D Tax Credits

Research and Development tax credits have been reformed:

  • SME scheme rate reduced to 86% (from 130%)
  • RDEC rate increased to 20% (from 13%)
  • New requirements for UK expenditure eligibility

Annual Investment Allowance

The Annual Investment Allowance (AIA) remains at £1 million, providing significant opportunities for businesses to claim immediate tax relief on qualifying capital expenditure.

Property Tax Changes

Stamp Duty Land Tax

SDLT rates and thresholds have been updated:

  • First-time buyer relief threshold: £425,000
  • Additional dwelling supplement: 3% on properties over £40,000
  • Non-resident surcharge: 2% on all property purchases

Furnished Holiday Lettings

The tax advantages for Furnished Holiday Lettings (FHL) are being phased out:

  • Capital allowances claims restricted from April 2025
  • Business asset disposal relief no longer available
  • Losses can only be offset against future FHL income

Planning Opportunities

Income Shifting

With the higher corporation tax rates, there may be opportunities for income shifting between personal and corporate structures, particularly for owner-managed businesses.

Pension Planning

The increased annual allowance provides enhanced opportunities for pension contributions, particularly beneficial for higher-rate taxpayers looking to reduce their tax liability.

Capital Gains Planning

With the reduced CGT annual exempt amount, timing of disposals becomes more critical. Consider:

  • Spreading disposals across tax years
  • Utilising spouse/civil partner exemptions
  • Maximising use of business reliefs

Important Dates

  • 6 April 2025: New tax year begins
  • 31 May 2025: P11D filing deadline
  • 31 July 2025: Second payment on account due
  • 31 January 2026: Self Assessment deadline

Action Required

To ensure you're fully prepared for these changes:

  • Review your current tax position and planning strategies
  • Consider the impact on cash flow and budgeting
  • Assess opportunities for tax-efficient investments
  • Update payroll systems and processes
  • Seek professional advice for complex situations

Need Expert Advice?

The 2025 tax changes present both challenges and opportunities. Our experienced team at Britain Accounting & Tax Consulting can help you navigate these changes and develop strategies to minimise your tax liability while ensuring full compliance.

Schedule a Consultation