With the new 2025-2026 tax year rapidly approaching and with many changes on the horizon that will impact SMEs, we felt it was timely to summarise some of the key changes. This could be a very long list so we’ve picked the ones that directly impact SMEs. Do read this blog carefully and research topics of interest yourself. As always, the key message from us is to be prepared and reflect on how it will impact your business – then if we can help with planning, bookkeeping or any admin-related support, give us a call.

Employer National Insurance Contributions

From 6 April 2025, the rate of employer National Insurance will increase by 1.2% to 15%. In addition, the secondary threshold – the level at which employers become liable to pay National Insurance on each employee’s salary – will reduce from £9,100 per year to £5,000 per year. This may impact the amount of salary vs divided that you choose to pay yourself and fellow directors – see our blog about the optimum director’s salary for the 2025-2026 tax year for more information. <link>

Employment Allowance

The employment allowance for businesses will increase from £5,000 to £10,500 and is now extended to all eligible employers. Previously there was a £100,000 salary cap. This means that businesses can employ up to four National Living Wage workers full-time without incurring employer National Insurance on their wages.

National Minimum Wage (NMW)

The NMW and National Living Wage (NLW) will increase from 1st April 2025 to the following:

	NMW Rate	Increase (£)	Increase (%)
National Living Wage (21 and over)	£12.21	£0.77	6.7
18-20 Year Old Rate	£10.00	£1.40	16.3
16-17 Year Old Rate	£7.55	£1.15	18.0
Apprentice Rate	£7.55	£1.15	18.0

Visit .gov for more information.

Capital Gains Tax

Increases in CGT will impact business owners and the self-employed. The new CGT rates are:

• Lower Rate: Rising from 10% to 18%
• Higher Rate: Increasing from 20% to 24%

These new rates align with the existing residential property rates, which remain unchanged at 18% for the lower rate and 24% for the higher rate.

The benefit of Business Asset Disposal Relief has reduced by 4% from April 2025 and a further 4% from April 2026.

Changes to VAT penalties

The VAT penalty regime introduced last year is now in full effect. Late VAT submissions incur penalty points, leading to financial penalties if thresholds are exceeded.

Company Vans

The classification of double cab pickup trucks has changed. From April 2025, these are considered to be cars for Corporation Tax and Income Tax purposes, meaning the reliefs available to Employers and Employees will be significantly reduced.

Also be aware of changes to:

Non-Domiciled Tax Status

The non-domiciled (non-dom) tax status is being phased out and there are changes to the non-dom inheritance tax regime. 

Making Tax Digital (MTD) updates coming soon From April 2026, MTD for income tax will apply to sole traders and landlords with an income of £50,000 or more, followed by those earning £30,000 or more in April 2027. SMEs should start preparing for this change.

Need bookkeeping support? 

Hour Hands has the bookkeeping support you need for your business or personal life. From preparing for tax returns, to reconciling payments; from payroll to invoicing, our team is here to support you with those regular tasks and those urgent activities that you just never seem to get round to completing. Outsourcing your tasks, and enjoy flexible support when you need it – be it on an ongoing basis or for resolving a particular challenge. 

To find out more simply visit our website or call us on 01727 818262. We will ask how we can support you and offer a solution either on an hourly rate or package cost. The choice is yours – we simply want to help.