Key Tax Changes and Initiatives for 2025/26: What Your Business Needs to Know

With the start of the new tax year on 6 April 2025, businesses must prepare for several key tax changes and initiatives introduced in the 2024 Autumn Budget under the new Labour government. These updates will impact employers, the self-employed, and various sectors, making it essential to stay informed and adapt accordingly.

At Zyla Accountants, we break down the major changes affecting businesses in 2025/26 and outline the necessary steps to ensure compliance and financial stability.

1. Increase to Employers’ National Insurance Contributions

From 6 April 2025, the rate of Employers' National Insurance Contributions (NICs) will increase from 13.8% to 15%. Additionally, the secondary threshold (the level at which employers start paying NICs) will reduce from £9,100 to £5,000 per year.

This means an increased NIC liability for approximately 940,000 employers, potentially impacting payroll costs and cash flow. Employers should:

• Update payroll software to reflect the new rates.

• Assess budget impacts and plan for increased costs.

2. Increased Employment Allowance for Small Businesses

To offset the employer NIC increase, the Employment Allowance will rise from £5,000 to £10,500 per year from 6 April 2025. Additionally, the existing £100,000 employer NIC threshold for eligibility will be removed, making more businesses eligible.

According to the Budget, 865,000 small employers will pay no NICs in the 2025/26 tax year. Employers can claim the allowance via payroll software and should apply early to benefit sooner.

3. Other National Insurance Updates

From 6 April 2025:

• The Lower Earnings Limit (LEL) will increase to £6,500 per year.

• The Small Profits Threshold (SPT) for self-employed individuals will rise to £6,845 per year.

• Voluntary Class 2 NICs will increase to £3.50 per week, and Class 3 NICs will rise to £17.75 per week.

• Employer NI relief for hiring veterans has been extended until 5 April 2026, allowing businesses to claim NIC exemptions on a veteran's first year of employment (up to £50,270 annual salary).

4. Minimum Wage Increases

From 1 April 2025, employers must adjust for new wage rates:

• National Living Wage (21+ years): £12.21 per hour

• 18-20 years: £10 per hour

• Under 18 years: £7.55 per hour

• Apprentices: £7.55 per hour

Employers should:

• Ensure payroll providers are ready to implement changes.

• Assess the financial impact and consider cost-saving measures where necessary.

5. Statutory Pay and Employer Relief Updates

From 6 April 2025:

• Statutory parental pay (e.g., maternity, paternity, shared parental, neonatal care, adoption, and bereavement pay) will increase to £187.18 per week.

• Statutory Sick Pay (SSP) will rise to £118.75 per week.

• Small employer's relief rate will increase from 103% to 108.5%, allowing eligible businesses to reclaim 100% of statutory payments plus an additional 8.5% from HMRC.

6. Capital Gains Tax Adjustments

The tax rate for Business Asset Disposal Relief (BADR) and Investors' Relief (IR) (formerly Entrepreneur's Relief) will:

• Increase to 14% from 6 April 2025.

• Rise further to 18% from 6 April 2026.

Businesses planning asset sales should consult advisors to optimize disposal timing and reduce tax liabilities.

7. Introduction of the Growth and Skills Levy

The Apprenticeship Levy will be replaced by the Growth and Skills Levy, backed by a £40 million investment, to provide businesses with greater flexibility in workforce training.

Key features include:

• Expanded training eligibility (including short courses and upskilling programs).

• Simplified access for small businesses.

• Regional alignment to address local skill gaps.

• Support for high-demand industries.

The full implementation timeline is still being finalized.

8. Extension of Retail, Hospitality, and Leisure Business Rates Relief

The Retail, Hospitality, and Leisure (RHL) Business Rates Relief Scheme has been extended for 2025/26, offering:

• 40% relief (capped at £110,000 per business).

• A continued freeze on the small business multiplier (49.9p).

• A standard multiplier increase to 55.5p.

This extension provides interim support until permanently lower tax rates take effect in 2026/27.

9. New Parental Leave for Neonatal Care

Under the Neonatal Care (Leave and Pay) Act 2023, from 6 April 2025, parents of babies admitted to neonatal care (for at least seven continuous days within the first 28 days of life) will be entitled to up to 12 weeks of paid leave.

Businesses should:

• Update HR policies and payroll systems to accommodate the changes.

• Communicate with employees and managers about the new entitlement.

10. Student Loan Threshold Adjustments

For the 2025/26 tax year, repayment thresholds for Plan 1, Plan 2, and Plan 4 student loans will increase. However, the postgraduate loan (Plan 3) threshold remains at £21,000.

Employers must update payroll systems to reflect these changes for employees making repayments through PAYE.

Preparing Your Business for the 2025/26 Tax Year

These upcoming tax changes will impact businesses in various ways, from payroll adjustments to employer contributions and relief schemes. Staying informed and acting early will help mitigate financial strain and ensure compliance.

At Zyla Accountants, we provide expert guidance to help businesses navigate tax changes efficiently. If you need tailored advice or assistance with payroll, tax planning, or compliance, get in touch with our team today.

Need help staying compliant? Contact Zyla Accountants for expert tax support.