The UK is on the cusp of significant tax changes in 2025 and 2026, impacting individuals, businesses, and a number of sectors. These changes, shaped by the 2024 Autumn Budget, aim to address economic challenges while promoting sustainable growth. Futurelink Group, with nearly 30 years of experience in UK and international contractor payroll services, is here to guide you through these complexities.

National Living Wage and Minimum Wage

From April 2025, the National Living Wage for individuals aged 21 and over will rise by 6.7%, to £12.21 per hour. Those aged 18-20 will see their minimum wage increase to £10 per hour, while apprentices will earn a minimum of £7.55 per hour. These adjustments aim to improve earnings for low-income workers amidst rising living costs.

Futurelink Group can help you navigate these changes and ensure compliance with the latest wage regulations. Learn more about our payroll solutions.

Employer National Insurance Contributions

Businesses will face increased costs as the employer National Insurance contributions (NICs) rate rises from 13.8% to 15% starting April 2025. Additionally, the Secondary Threshold—the salary level at which employers begin paying NICs—will drop from £9,100 to £5,000 annually. However, small businesses may benefit from the Employment Allowance increase to £10,500.

Futurelink Group offers tailored payroll solutions to help mitigate these costs and streamline your payroll administration. Discover Futurelink’s services and what sets them apart from others. 

Other Tax Changes in the UK include:

Council Tax

Local authorities in England can increase council tax by up to 5% starting April 2025. This could raise the average Band D council tax bill by approximately £109 annually, reflecting efforts to fund local services amidst budgetary pressures.

Road Tax Changes

Electric vehicle (EV) owners will no longer enjoy Vehicle Excise Duty (VED) exemptions starting April 2025. EVs will face a first-year rate of £10 and additional charges for vehicles priced over £40,000. Meanwhile, cars emitting higher CO2 levels will see their first-year tax rates double, with those emitting over 255g/km paying up to £5,490.

Capital Gains Tax

Capital Gains Tax (CGT) rates will rise significantly:

• The lower rate increases from 10% to 14% in April 2025 and then to 18% in April 2026.
• The higher rate rises from 20% to 24%, maintaining current rates for residential property gains.

These changes aim to raise additional revenue while maintaining incentives for entrepreneurs through Business Asset Disposal Relief.

Corporation Tax

The corporation tax rate remains capped at 25% for companies with profits exceeding £250,000. Businesses with profits below £50,000 will continue paying a reduced rate of 19%, with marginal relief available for those earning between £50,001 and £250,000.

Non-Domiciled Tax Regime

The current non-dom tax regime will be abolished in April 2025, replaced by a residence-based system designed to attract international talent and investment. A new four-year Foreign Income and Gains (FIG) regime will exempt qualifying individuals from taxes on foreign income during their initial years of UK residency.

VAT on Private Schools

From January 2025, private school fees will be subject to VAT at the standard rate. Additionally, business rates relief for private schools will end in April 2025, raising significant revenue for public education funding.

Income Tax Thresholds

Income tax thresholds outside Scotland will remain frozen until April 2028 but will rise with inflation thereafter. In Scotland, progressive income tax rates continue with higher bands for top earners compared to the rest of the UK.

Pensions and State Benefits

State pensions will rise by 4.1% in line with the triple lock guarantee. The full new state pension increases to £230.25 weekly in April 2025, providing much-needed support for retirees amidst inflationary pressures.

Conclusion

The UK’s tax landscape is undergoing substantial changes that reflect government priorities in addressing fiscal challenges while promoting economic stability and fairness. These reforms carry significant implications for individuals and businesses alike. Staying informed and seeking professional advice is essential to navigate this evolving environment effectively. Futurelink Group is committed to keeping you informed and compliant.

Take Action Now: Partner with Futurelink Group for Expert Guidance!

• Need personalised advice? Contact us today for a comprehensive tax planning consultation tailored to your specific situation. Get in touch.
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With nearly 30 years of accountancy and payroll experience, Futurelink Group is your trusted partner in navigating the complexities of the UK tax system. Don’t navigate these changes alone – let us help you stay ahead!