HMRC overhaul:

HMRC Announces Five Key Tax Changes for Businesses Starting April 2025

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Starting April 2025, UK businesses will have to adapt to a series of significant tax changes introduced by HM Revenue & Customs (HMRC). These adjustments, part of the UK government’s latest fiscal policy, are designed to increase tax revenue while also providing relief in some areas.

The changes will affect employers, investors, and businesses across various industries, with higher National Insurance Contributions (NICs), Capital Gains Tax (CGT) changes, business rate adjustments, and more.

Here’s a full breakdown of the five key tax changes taking effect in April.

1. Increase in Employers’ National Insurance Contributions (NICs)

Employers will face higher National Insurance costs as HMRC increases NIC rates while adjusting contribution thresholds.

  • New Employer NIC Rate: Rising from 13.8% to 15%.
  • Lower NIC Threshold: The earnings threshold at which employers must contribute will drop from £9,100 to £5,000 per year.

These changes mean that businesses will pay more per employee, increasing overall payroll costs. Companies should review payroll budgets and consider how this will affect hiring and wages.

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2. Expansion of Employment Allowance

To offset higher NIC costs, HMRC is increasing the Employment Allowance, which helps small businesses reduce their NIC bill.

  • Allowance Increase: From £5,000 to £10,500.
  • Eligibility Update: Previously, businesses with NIC liabilities over £100,000 were excluded. From April, this limit will be removed, meaning more businesses can claim the allowance.

This change is expected to benefit small and medium-sized enterprises (SMEs) the most, helping them manage rising payroll costs.

3. Changes to Capital Gains Tax (CGT) Rates

Investors and business owners selling business assets will see an increase in Capital Gains Tax (CGT) rates:

  • Business Asset Disposal Relief (BADR):
    • Current Rate: 10%
    • From April 2025: 14%
    • From April 2026: 18%

BADR allows business owners to pay a lower CGT rate when selling assets such as company shares. However, the increase from 10% to 14% in 2025 means investors will face higher tax bills on gains.

4. Adjustments to Business Rates

Business owners in retail, hospitality, and leisure will see reductions in business rates relief:

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  • Business Rates Relief Reduction:
    • Current Relief: 75% discount
    • New Relief (from April 2025): 40% discount
    • Maximum Cap Per Business: £110,000

Additionally, HMRC is reassessing property values to ensure business rates reflect market conditions as of April 1, 2021—the first full revaluation since 2017.

5. Increase in Vehicle Excise Duty (VED)

Businesses operating fleet vehicles or company cars will face higher Vehicle Excise Duty (VED) costs.

  • Standard VED Rate: Increases from £155 to £165.
  • First-Year Tax on High-Emission Vehicles: Cars emitting over 76g/km CO₂ will see their first-year tax double.

This move is part of the UK’s climate strategy to encourage low-emission vehicle adoption.

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Additional Tax & Compliance Updates

Beyond these five major changes, there are additional important updates for businesses:

  • National Minimum Wage Increase:
    • New Rate: £12.21 per hour (for workers aged 21 and over).
    • Employers must comply or face penalties.
  • Statutory Leave Increases:
    • Statutory Sick Pay (SSP): Rising to £118.75 per week.
    • Statutory Parental Leave Pay: Also increasing.

How Businesses Can Prepare

With multiple tax hikes and threshold changes, UK businesses must take action now to ensure compliance and minimize financial impact. Key steps include:

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  • Review Payroll & NIC Liabilities: Budget for higher employer NIC costs.
  • Claim Employment Allowance: Ensure eligibility to reduce NIC payments.
  • Plan for Capital Gains Tax Increases: Consider selling business assets before April 6.
  • Update Payroll Software for Wage & Leave Increases.
  • Assess Business Rates Changes & Adjust Budgets Accordingly.
  • Consider Green Vehicle Options to Reduce VED Costs.

By staying informed and proactive, businesses can adapt to these tax changes while maintaining compliance with HMRC regulations.

For official HMRC guidance and updates, visit gov.uk.

This article has been carefully fact-checked by our editorial team to ensure accuracy and eliminate any misleading information. We are committed to maintaining the highest standards of integrity in our content.

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