As we enter the 2025/26 tax year, it’s important for businesses and individuals across the UK to understand the latest tax updates and how they may affect financial planning. Whether you’re a sole trader, limited company owner, or individual taxpayer, staying informed can help you stay compliant and take advantage of any new tax-saving opportunities.

1. Personal Tax Allowances and Rates

Personal Allowance (unchanged):

The standard personal allowance for 2025/26 remains at £12,570, meaning you can earn this amount before paying any income tax.

Income Tax Bands in England, Wales, and Northern Ireland:

• Basic Rate (20%): £12,571 to £50,270

• Higher Rate (40%): £50,271 to £125,140

• Additional Rate (45%): Above £125,140

Note: Scotland has different income tax bands and rates.

National Insurance Contributions (NIC):

As part of the government’s effort to reduce the tax burden:

• The employee NIC rate has been reduced further to 6%, following cuts in 2024.

• Self-employed Class 4 NICs are now at 6%, and Class 2 NICs have been abolished entirely from April 2025.

2. Dividend and Capital Gains Tax Changes

Dividend Allowance:

• The tax-free dividend allowance has been reduced to £500 (down from £1,000 in 2024).
  Dividend tax rates remain unchanged:

  • Basic Rate: 8.75%

  • Higher Rate: 33.75%

  • Additional Rate: 39.35%

Capital Gains Tax (CGT):

• The CGT annual exempt amount is now £3,000 (previously £6,000 in 2024).

• CGT rates:

  • Basic rate taxpayers: 10% (or 18% for residential property)

  • Higher/additional rate taxpayers: 20% (or 24% for residential property)

3. Corporation Tax

• For companies with profits above £250,000, the main corporation tax rate remains at 25%.

• Companies with profits under £50,000 pay the small profits rate of 19%.

• Profits between £50,000 and £250,000 are subject to marginal relief, creating a tapered rate between 19% and 25%.

4. VAT and Thresholds

• The VAT registration threshold has increased to £90,000 (from £85,000).

• Deregistration threshold is now £88,000.

5. Making Tax Digital (MTD)

From April 2026, Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) becomes mandatory for sole traders and landlords earning over £30,000. While it’s not compulsory this year, it’s a good time to prepare:

• Use MTD-compliant software like QuickBooks, Xero, or FreeAgent.

• Keep digital records and submit quarterly updates to HMRC.

6. Pensions and Savings

• The Annual Allowance for pension contributions remains at £60,000.

• The Lifetime Allowance has been fully abolished in 2025, providing more flexibility for high earners.

7. Key Deadlines for 2025

How We Can Help

At Greystone Accountants, we help businesses and individuals across Birmingham, Walsall and beyond stay compliant and tax-efficient. Whether you need help with tax planning, your Self Assessment return, or business accounts, we can provide tailored advice.

👉 Book a free consultation today or get an instant accounting quote through our interactive form.