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As of March 19, 2025, several significant updates to the UK’s tax legislation are set to impact individuals and businesses. Here’s an overview of the key changes:
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Employer National Insurance Contributions (NICs)
Effective from April 6, 2025, employers will face an increase in National Insurance Contributions:
- Rate Increase: The employer NIC rate will rise from 13.8% to 15%.
- Threshold Adjustment: The earnings threshold for employer NICs will decrease from £9,100 to £5,000 per year.
These changes are expected to significantly affect small businesses and low-paid workers, potentially leading employers to adjust wages, raise prices, or reduce employment to manage the increased costs.
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Council Tax Increases
Beginning in April 2025, local authorities in England are authorized to increase council tax by up to 5%. This means that households could see their annual bills rise by approximately £100 or more, depending on local council decisions.
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Vehicle Excise Duty (Car Tax) Revisions
- Significant changes to car tax rates will take effect from April 2025, impacting both low-emission and high-emission vehicles:
- Low-Emission Vehicles: New cars emitting between 1-50 g/km of CO₂ will see tax rise from £10 to £110. Vehicles emitting 51-75 g/km of CO₂ will face increases from £30 to £130.
- High-Emission Vehicles: Rates for cars emitting over 255 g/km of CO₂ will double, with the first-year tax increasing to £5,490.
These adjustments aim to encourage the adoption of lower-emission vehicles.
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Stamp Duty Land Tax (SDLT) Adjustments
Temporary measures introduced in September 2022 are set to end in April 2025, resulting in more property purchases becoming subject to stamp duty charges. This change will affect homebuyers, particularly those purchasing additional properties or buy-to-let investments.
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Inheritance Tax (IHT) Reforms
From April 2025, reforms to inheritance tax rules will result in fewer exemptions, potentially increasing the tax liabilities for estates. Individuals who have been UK residents for at least 10 out of the previous 20 tax years will be classified as ‘long-term residents’ and become subject to UK inheritance tax on assets situated both in the UK and abroad.
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Capital Gains Tax (CGT) Increases
Capital Gains Tax rates are set to rise in 2025:
- Basic-Rate Taxpayers: The CGT rate will increase from 10% to 15%.
- Higher-Rate Taxpayers: The CGT rate will rise from 20% to 25%.
These changes will affect individuals selling assets such as property, stocks, or valuable possessions.
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Business Rates Relief for Retail, Hospitality, and Leisure Sectors
Businesses in the retail, hospitality, and leisure sectors will continue to receive business rates relief during 2025 (until April 2026), although at a reduced discount rate of 40% from April 2025.
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Classification of Double Cab Pick-Up Vehicles (DCPUs)
From April 2025, the government will treat double cab pick-up vehicles (DCPUs) with a payload of one tonne or more as cars for certain tax purposes. This change affects capital allowances, benefits in kind, and some deductions from business profits.
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Personal Independence Payment (PIP) Changes
Proposed changes to the Personal Independence Payment (PIP) could result in up to 1.2 million people losing between £4,200 and £6,300 annually by 2029. These cuts have sparked significant debate and concern among various stakeholders.
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