2025-26 tax year – what UK business owners can expect  

Whether you’re self-employed or running a limited company, there are several changes to be aware of in the 2025-26 tax year – from employer National Insurance contributions and minimum wage rates to company size thresholds and Capital Gains Tax. 

Here’s a summary of what you can expect as a UK business owner. Most changes will take effect on 6 April 2025, the first day of the new tax year.

1. Employer National Insurance contributions (NICs)

Many changes in the 2025-26 tax year will directly impact employers, the most notable of which relate to secondary Class 1 NICs.  

From 6 April 2025, the following changes to employer NICs will take effect: 

• The rate of employer (secondary) Class 1 NICs on employee’s earnings will increase from 13.8% to 15% 
• The secondary threshold (when employers become liable to pay secondary NICs on an employee’s earnings) will be cut from £9,100 to £5,000 per year 
• Employers’ Class 1A and Class 1B NIC rates on employees’ expenses and benefits will also increase from 13.8% to 15% 

However, it’s not all doom and gloom. The government will also increase the maximum Employment Allowance by 110%, from £5,000 to £10,500 per year, and remove the £100,000 eligibility cap. These two measures are designed to help smaller employers by providing more relief on their secondary National Insurance liabilities. 

2. NIC Lower Earnings Limit and Small Profits Threshold

The NIC Lower Earnings Limit and Small Profits Threshold determine when an employee or self-employed individual qualifies for contributory benefits, including the State Pension.

  

From 6 April 2025, the following changes will take effect: 

• The Lower Earnings Limit (LEL) for employees will rise from £6,396 to £6,500 per year 
• The Small Profits Threshold (SPT) for the self-employed will increase from £6,725 to £6,845 per year 

Employees (including company directors) and self-employed individuals must earn at least the LEL or SPT to have their NICs ‘treated as paid’ and to be eligible for contributory benefits. They don’t need to pay NICs until their earnings exceed £12,570 annually.

3. Minimum wage increases

The annual increase to National Living Wage and National Minimum Wage rates will take effect from 1 April 2025. The changes to hourly pay rates are as follows: 

• National Living Wage (21 and over) – £12.21 
• National Minimum Wage (18 to 20) – £10.00 
• National Minimum Wage (16 to 17) – £7.55 
• Apprentice rate – £7.55 
• Accommodation offset – £10.66 

These changes will benefit many UK workers, but they may present additional challenges to employers at a time of increasing National Insurance liabilities.  

4. Increases to statutory payments for employees

Statutory pay rates for employees will also rise at the start of the 2025-26 tax year. The changes from 6 April 2025 are as follows: 

• Statutory Sick Pay – increasing to £118.75 per week 
• Statutory Maternity, Paternity, Adoption, Shared Parental, and Parental Bereavement Pay – increasing to £187.18 per week 
• Maternity Allowance – increasing to £187.18 per week 

From 6 April 2025, employees will also have a ‘day one right’ to neonatal care leave and pay. This new measure supports working parents with babies in neonatal care. It will provide eligible employees additional time off and Statutory Neonatal Care Pay of £187.18 per week.  

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The government will also increase Small Employers’ Relief from 103% to 108.5%. This will enable smaller employers to recover 100% of employees’ Statutory Maternity, Paternity, Adoption, Parental Bereavement, Shared Parental, and Neonatal Pay – plus an additional 8.5% compensation.  

Employers that are not eligible will be able to reclaim 92% of statutory payments instead. 

5. Annual increase to State Pension

Due to the government’s triple lock system, pensioners will receive a 4.1% increase to their State Pensions for the 2025-26 tax year. The rates will change as follows: 

• The full, new flat-rate State Pension (for those who reached State Pension age after April 2016) – rising from £221.20 to £230.25 per week  
• The full, old basic State Pension (for those who reached State Pension age before April 2016) – rising from £169.50 to £176.45 a week 

These increases will provide recipients of the new State Pension with an additional £470 per year, while recipients of the basic State Pension will receive an extra £361 per year.

6. Changes to company size thresholds

The turnover thresholds for micro, small, and medium-sized companies will increase from 6 April 2025, per The Companies (Accounts and Reports) (Amendment and Transitional Provision) Regulations 2024. There are no changes to the monetary size thresholds for large companies or the average number of employees for any company size. 

The table below shows the thresholds for accounting periods beginning on or after 6 April 2025. 

	Micro-entity	Small company	Medium company	Large company
Annual turnover	Not more than £1 million	Up to £15 million	Not more than £54 million	More than £54 million
Balance sheet total	Not more than £500,000	Up to £7.5 million	Not more than £27 million	More than £27 million
Average number of employees	Not more than 10	Up to 50	Not more than 250	More than 250

 

These changes will enable more companies and limited liability partnerships (LLPs) to qualify as micro-entities or small companies and benefit from reduced disclosures under the small companies regime.  

The new regulations will also remove the requirement for medium-sized and large companies to include certain information in their directors’ reports. 

7. Changes to Capital Gains Tax

The 10% Capital Gains Tax rate for Business Asset Disposal Relief (BADR) and Investors’ Relief (previously Entrepreneurs’ Relief) will increase to 14% for qualifying disposals made on or after 6 April 2025.  

The rate will then increase from 14% to 18% from April 2026. This will bring it in line with the lower main rate of CGT.  

This measure is one of several changes to Capital Gains Tax announced as part of the Autumn Budget 2024.

8. Extension of RHL business rates relief scheme

The UK government has extended the business rates relief scheme for the retail, hospitality, and leisure (RHL) industry for another year, but at a lower rate of 40% (down from 75%). The £110,000 cash cap limit per business still applies. 

The standard multiplier (the figure used to calculate business rates) for RHL properties will increase from 54.6p to 55.5p, while the small business multiplier remains frozen at 49.9p. 

9. Abolition of furnished holiday lettings (FHL) tax regime

The furnished holiday lettings (FHL) tax regime will be scrapped from 6 April 2025, removing the tax advantages and separate reporting requirements for individuals, companies, and trusts that operate or sell FHL accommodation. 

Instead, income and gains from FHL properties will form part of the person’s UK or overseas property business, aligning with the tax rules for non-furnished holiday let property businesses. 

10. HMRC Interest Rates on late payments to rise

As announced at the Autumn Budget 2024, the UK government will increase the late payment interest rate that HMRC charges on unpaid tax liabilities by 1.5 percentage points to the Bank of England base rate (the ‘Bank Rate’) plus 4 percentage points. This measure will take effect on 6 April 2025. 

Thanks for reading

Please comment below if you have any questions. Should you require help with your business tax and finances, we recommend seeking professional advice from an accountant or financial advisor.  

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