Tax changes from 6 Apri

Sara White, Editor, Business & Accountancy Daily

What’s going up for the new 2025-26 tax year from hike in employer NI to higher HMRC interest rates, end of FHL tax breaks, double cab pick-ups and non dom overhaul

From 6 April, a number of tax changes will come into force affecting businesses and individual taxpayers.

The big tax change worrying businesses and employees alike is the 1.2% hike in employer’s National Insurance contributions (NICs). This affects all employers, adding an average £800 per head to employment costs. The impact will be felt more acutely as it is coupled with the slashing of the secondary threshold to £5,000 from current £9,100.

At the same time, the employment allowance has been increased to £10,500 from £5,000. The £100,000 threshold has also been removed, expanding this to all eligible employers.

HMRC interest rates for late payments will be increased by 1.5% for all taxes from 6 April, which means a rate of 8.5% will be due in future. The rate is calculated at base rate plus 4%, up from the current plus 2.5% premium.

Late payment penalties have also increased to 10% from current 4% effective from 1 April. The slowest payers will face a more than doubling in the current penalty rate. Penalties for late payments of income tax under self assessment will be increased, with those failing to pay within a month facing a 10% penalty, more than double the current rate and this rise came into force from 1 April. This regime will also be applied to VAT late payment penalties. These penalties will rise from 2% to 3% of unpaid tax at 15 days, 2% to 3% at 30 days, and 4% to 10% from day 31. 

Tax thresholds are frozen for another year so there will be no change here. The tax free personal allowance remains at £12,570 per year, dragging more people into higher rate tax bands as salaries rise.

In Scotland, two rate bands are changing. The starter rate band will increase by 22.6% and the basic rate band by 6.6%. This will increase the thresholds for paying both the basic 20% and intermediate 21% rate of tax by 3.5%. The higher, advanced and top rate thresholds will be frozen at their current levels in cash terms to the end of this Scottish parliament (2026-27).

Personal savings allowance remains at £1,000 for basic rate, £500 for higher rate and £0 for additional rate taxpayers.

This is something to watch carefully with high interest rates, meaning that using tax-free savings products like ISAs is more important than usual. In addition, the government is going to review the future ISAs this year, likely before the autumn Budget so maximising this type of saving is worth considering.

For businesses, the rate for business asset disposal relief (BADR) and investors’ relief will increase 4% from the current 10% to a standard rate of 14% from 6 April 2025 before increasing again the following year to equalise with the main lower rate of 18% capital gains tax from 6 April 2026.

Income from furnished holiday lets (FHL) will be treated the same as long-term lets from 6 April for individuals, trusts and partnership. This means an FHL ‘will no longer be eligible for beneficial capital allowances treatment, while eligibility for existing reliefs will cease,’ said Becky Fraser, tax senior manager at Armstrong Watson.

For non doms, the current remittance basis rules for non doms will be abolished and switched to a system based on tax residence. Effective from 6 April, the concept of domicile will be replaced by long-term residency.

‘Looking back over a 20-year period, if someone is resident for income tax purposes in the UK for 10 out of those 20 years, then they will be treated as being a long-term resident for IHT and taxed accordingly on the value of their worldwide assets,’ said Elliot Lewis, head of private client at Thackray Williams.

A new temporary repatriation facility (TRF) for previous remittance basis users will also be introduced. This means non doms with historic untaxed foreign income and gains (FIG) arising prior to April 2025 will be able to pay reduced tax as a one-off payment on some or all that FIG. A capital gains tax (CGT) re-basing for disposals made on or after 6 April 2025 on personally owned assets held since at least 5 April 2017 will also be available.

The much dreaded double cab pick-up tax hike started on 1 April for corporation tax and 6 April for income tax, whereby the vehicles will be treated as cars, not commercial vehicles. This means the government will treat double cab pick-up vehicles (DCPUs) with a payload of one tonne [1,016 kilos] or more as cars for certain tax purposes. The Ford Ranger is one of the most popular pick up trucks in the UK, with each double cab model having a payload of over one tonne.

‘This change will mainly impact farm businesses and menas DCPUs no longer qualify for annual investment allowance but will instead be subject to the same capital allowances as cars,’ said Becky Fraser, tax senior manager at Armstrong Watson.

Statutory payment rises also come into effect. A new statutory payment for neonatal care leave starts on 6 Apri and the rate will be £187.18 per week or 90% of earnings if lower.

Neonatal care leave will be available for those with responsibility for babies born on or after 6 April 2025. Employees who have parental or other prescribed responsibility for a child who is receiving, or has received, neonatal care will be entitled to the leave as a day one employment right. Employees will be entitled to take one weeks leave for each uninterrupted seven-day period the child is receiving neonatal care, up to a maximum of 12 weeks leave.

Child benefit payments are increasing from 7 April 2025. Parents will receive £26.05 per week - or £1,354.60 a year - for the eldest or only child and £17.25 per week - or £897 a year - for a second child. Child benefit is usually paid every four weeks and will automatically be paid into a bank account.