“Stability” and tax rises
The new government has promised an era of fiscal stability. This includes the intention to just make tax announcements once a year, in an autumn Budget. However, this stability involves many tax rises, including those put in place by the Conservative government. The freezing of income tax allowances and thresholds until 2028, which has been dragging a lot more people into paying tax or having to pay it at higher rates, remains in place. Although Rachel Reeves has announced that these allowances and thresholds will begin to rise with inflation from 6 April 2028, that is still a long way off!
Other Conservative plans taken up include, from 6 April 2025, the tax advantages of furnished holiday lets being abolished and major changes for ‘non-doms’, who will no longer have the option of shielding foreign income and gains from tax by claiming to be taxed on the ‘remittance basis’. Indeed, non-dom status will cease to be relevant for tax purposes from 2025/26, as the extent to which foreign assets come within the scope of Inheritance Tax will in future be based on how long someone has been resident in the UK. Anyone affected by these changes should seek advice if they have not already done so.
The Labour government has raised most rates of CGT (from Budget Day) and the rate payable on gains eligible for Business Asset Disposal Relief will rise from 10% to 14% on 6 April 2025 and then to 18% for 2026/27, when it will only be six percentage points less than the main CGT rate of 24%. Could this be a reason to bring forward planned disposals of qualifying assets?
The proposed restrictions on Inheritance Tax reliefs, which have caused much anger in the farming community, also affect many other types of business. They are due to take effect in April 2026 and may be subject to some revision before then, but anyone potentially affected may need to revise their Will.
All employers need to budget for increases in the rates of National Living Wage and National Minimum Wage from 1 April 2025, as well as for the higher employers’ National Insurance charges coming in from 6 April.
There seems to be little good news around on the tax front, but the availability of the 100% allowance for businesses investing in new electric vehicles and charge points has been extended, now expiring on 31 March 2026 (companies) or 5 April 2026 (income tax businesses). However, in April 2025, the tax treatment of double-cab pick-up vehicles with a payload of more than a tonne is changing; going forward, they will be treated as cars rather than vans for income tax and corporation tax. This will adversely affect the tax treatment for businesses and employees (although there are transitional benefit-in kind rules for those vehicles purchased or ordered before 6 April 2025).
As you can see, there is much to think about. We recommend you undertake an annual review of your financial affairs, in order to check that you are not paying more tax than you need to and to see whether any structures you set up in the past are still appropriate. Between now and the end of the tax year (5 April 2025) is a good time to assess whether you are as well defended against high tax charges as you can be.
Of course, the personal circumstances of each individual must be taken into account in deciding whether any particular plan is suitable or advantageous, but the suggestions in this document may give you some ideas. We are happy to discuss them with you in more detail.
