business tax after the March 2025 budget

As we look ahead to the business tax landscape following the March 2025 budget, there are several significant changes on the horizon. These adjustments, from National Insurance to capital gains tax, will have wide-ranging implications for businesses of all sizes. Understanding these updates is crucial for business owners, especially those seeking to optimise their tax strategies and maintain compliance. This article will break down the key changes and their potential impacts.

Key Takeaways

• Employers will face higher National Insurance contributions starting April 2025, increasing rates from 13.8% to 15%.

• Capital Gains Tax rates will rise for Business Asset Disposal Relief, moving from 10% to 14% in 2025 and 18% in 2026.

• New rules on company loans will tighten anti-avoidance measures, affecting how shareholders manage debts to their companies.

• Making Tax Digital compliance will become mandatory for more businesses, impacting bookkeeping companies near me and their operations.

• Stamp duty thresholds will decrease, resulting in higher taxes for property purchases, especially for first-time buyers.

Impact Of National Insurance Changes

As an employer, the upcoming changes to National Insurance (NI) are definitely something I'm keeping a close eye on. It's not just about the numbers; it's about how these adjustments will ripple through my business and affect my employees. The changes are among the most substantial seen in recent years, designed to raise a huge £25 billion annually.

Increased Rates For Employers

From April 6th, 2025, the rate of employer NI contributions is set to increase. The rate will jump from 13.8% to 15% on Class 1, 1A, and 1B contributions. This increase will directly impact my payroll costs, and I'll need to adjust my budget accordingly. It's a significant hike that I can't ignore. I'll need to update my payroll systems to reflect any rate hikes in rates.

Lower Earnings Threshold

Another key change is the reduction in the earnings threshold. Currently, I start paying NI on employee earnings above £9,100 per year. That's dropping to £5,000. This means I'll be paying NI on a larger portion of my employees' earnings, further increasing my costs. Directors who pay themselves a base salary and the remaining income in dividends will have to revisit how much they pay themselves so that they don’t breach the threshold for National Insurance.

Implications For Small Businesses

For small businesses like mine, these changes can be particularly challenging. The combined effect of increased rates and a lower threshold means higher payroll expenses.

I'm bracing myself for a significant increase in costs per employee. I'll need to carefully review my staffing levels and consider ways to mitigate these additional expenses. It might mean re-evaluating my pricing strategy or finding other areas where I can cut costs. It’s a tough balancing act to ensure I can continue to offer competitive wages while remaining profitable.

Here's a quick summary of the changes:

• Employer NI rate increases to 15%.

• Lower earnings threshold of £5,000.

• Increased payroll costs for most businesses.

Adjustments To Capital Gains Tax

Okay, so Capital Gains Tax (CGT) is getting a bit of a shake-up. It's something I've been keeping an eye on, especially with the budget changes coming into effect. It's all about how much tax you pay when you sell or dispose of an asset, and there are a few things to be aware of.

Changes To Business Asset Disposal Relief

Business Asset Disposal Relief (BADR), previously known as Entrepreneurs’ Relief, is designed to lower the CGT rate when you sell qualifying business assets. Currently, if you qualify, you pay CGT at a rate of 10% on eligible gains, up to a lifetime limit of £1 million. However, the Autumn Budget 2024 brought some changes. For disposals on or after 6 April 2025, the rate increases to 14%, and then again to 18% from 6 April 2026. This gradual increase is supposedly to give business owners time to adjust, but it might just push people to sell sooner to take advantage of the lower rate while they still can. To qualify for BADR, you need to have met certain conditions for the two years leading up to the disposal, such as being an officer or employee of the company and holding at least 5% of the shares and voting rights. It's worth checking if you can use Business Asset Disposal Relief before making any big decisions.

Future Tax Rates For Disposals

Looking ahead, the standard CGT rates have also seen some adjustments. CGT has risen from 10 per cent to 18 per cent for basic rate taxpayers, and from 20 per cent to 24 per cent for higher and additional rate taxpayers. This means that if you're planning to sell any assets, like shares or a second property, you'll need to factor in these higher rates when calculating your potential tax liability. It's all part of a broader effort to increase tax revenue, but it definitely impacts investment strategies.

Planning For Capital Gains

Given these changes, it's more important than ever to plan carefully for capital gains. Here are a few things I'm considering:

• Timing: If you're thinking of selling an asset, consider the timing. Selling before April 2025 might be beneficial to take advantage of the current BADR rate, if applicable.

• Utilise Allowances: Make sure you're using your annual CGT allowance effectively. For the current tax year, you can make up to £3,000 in capital gains tax-free before the allowance resets.

• Tax-Efficient Investments: Consider tax-efficient investments like ISAs or Venture Capital Trusts (VCTs) to shield your gains from CGT. You can invest up to £20,000 in an Individual Savings Account (ISA) each tax year, shielding it from income tax and capital gains tax.

It's also worth remembering that tax laws can change, so staying informed and seeking professional advice is crucial. I'm planning to speak with my accountant to review my investment portfolio and make sure I'm taking the most tax-efficient approach possible.

New Regulations For Company Loans

Understanding The S.455 Charge

As someone who keeps a close eye on business finances, I've noticed some important changes regarding loans made by companies to their shareholders. The infamous S.455 charge is something we all need to be aware of. This charge applies when a shareholder owes the company money that isn't repaid within nine months of the accounting period's end. The tax is a hefty 33.75% of the outstanding debt at that nine-month mark. While HMRC does refund it when the debt is cleared, it's not a quick process – it takes at least nine months after the accounting period in which the debt was cleared.

Tighter Anti-Avoidance Rules

Existing rules try to stop people from dodging the S.455 charge by temporarily clearing a debt just before the nine-month deadline, a practise known as 'bed and breakfasting'. However, some companies have been exploiting loopholes, using chains of businesses to shuffle debt around and avoid triggering the charge. The recent budget included measures to close these loopholes. The government announced that the existing anti-avoidance rule is being replaced with a tougher version, effective from Budget day (30 October 2024), designed to block these 'chain' avoidance tricks. If your company isn't involved in such schemes, you probably don't need to worry. It's still important to understand the tax implications of these loans.

Implications For Shareholders

These changes mean we need to be extra careful about how we manage company loans. It's not just about the S.455 charge itself, but also about ensuring we don't inadvertently fall foul of the new anti-avoidance rules.

It's crucial to maintain meticulous records of all transactions, including loan amounts, repayment dates, and any interest charged. Staying compliant with these regulations is essential to avoid penalties and maintain a healthy financial standing for both the company and its shareholders.

Here are a few key things to keep in mind:

• Repayment Deadlines: Stick to the nine-month repayment window to avoid the S.455 charge.

• Record Keeping: Maintain accurate and detailed records of all loan transactions.

• Professional Advice: If you're unsure about any aspect of these regulations, seek advice from a qualified accountant or tax advisor.

Making Tax Digital Compliance

Okay, so Making Tax Digital (MTD) is something I've been trying to get my head around for a while now. It's a big shift, and it's going to affect pretty much everyone in business sooner or later. Basically, it's all about moving away from paper records and embracing digital accounting. Let's break it down.

Requirements For Businesses

Right, so what do I actually need to do? Well, the main thing is keeping digital records. This means using software that's compatible with HMRC's systems. If you're already using accounting software, you might just need to update it. If not, it's time to find something that works for you. Also, businesses with a taxable turnover over the VAT threshold (£85,000) must follow MTD rules. This means keeping digital records and using specific software to submit your VAT returns. Businesses with a taxable turnover below £85,000 will be expected to follow the rules for their first return on or after April 2022.

You need to follow the requirements for Making Tax Digital for Income Tax if you are self-employed or a landlord from:

• April 6, 2026 if you have an annual business or property income of more than £50,000

• April 2027 if you have an annual business or property income of more than £30,000

• Using software to submit your VAT returns

Impact On Bookkeeping Companies Near Me

I reckon this is going to be a bit of a boom time for bookkeeping companies bookkeeping companies near me. Loads of businesses, especially smaller ones, are going to need help getting set up with the right software and understanding the new rules. I can see a lot of firms offering training and support packages. It's a good opportunity for them, and honestly, probably a lifesaver for some of us who aren't exactly tech-savvy.

Transitioning To Digital Records

Okay, so how do I actually make the switch? Here's what I'm planning to do:

1. Choose the right software: There are loads of options out there, so I need to do my research and find something that suits my business needs and budget.

2. Get training: I'm probably going to need some help getting to grips with the new software. I'll look for online courses or maybe even hire a consultant to show me the ropes.

3. Start small: I'm not going to try and switch everything over at once. I'll start with a small part of my business and gradually move everything over as I get more comfortable.

It's a bit daunting, but I know I need to get on board with this. The sooner I start, the better prepared I'll be. Plus, I'm hoping it will actually make my life easier in the long run. No more mountains of paperwork – that's got to be a good thing, right?

Changes To Stamp Duty Thresholds

Okay, so stamp duty is changing again. It feels like they're always tinkering with it, doesn't it? Anyway, here's the lowdown on what's happening after the March 2025 budget. It's going to affect quite a few people, especially those looking to buy their first home or move up the property ladder. Buckle up, it's not exactly cheerful news.

Impact On Property Purchases

From what I understand, the temporary stamp duty threshold that was in place is coming to an end. This means the threshold at which you start paying stamp duty is going down. Instead of paying stamp duty on properties over £250,000, you'll now pay it on properties over £125,000. That's a pretty big difference, and it's going to mean more people paying stamp duty, and paying more of it. It's all part of the government's plan, apparently, but it's not exactly going to make buying a house any easier. If you're buying property, you might want to consider capital gains tax implications.

First-Time Buyer Considerations

First-time buyers aren't getting off scot-free either. The threshold for first-time buyers is also being reduced. It's dropping from £425,000 to £300,000. So, if you're a first-time buyer looking at properties in that price range, you're going to need to factor in stamp duty costs that you might not have had to before. It's a real kick in the teeth, especially when you're already struggling to save for a deposit. I'd suggest getting some advice from bookkeeping companies near me to understand the full impact.

Regional Variations In Rates

Now, this is where it gets a bit more complicated. Stamp duty is set by the government, so the thresholds are the same across England and Northern Ireland. However, the impact of these changes will be felt differently depending on where you are buying. In areas where house prices are generally lower, like parts of the North, a larger proportion of properties will now fall within the stamp duty bracket. In London and the South East, where prices are higher, it might not have as big an impact, but it's still another cost to consider. It's worth checking out the local market conditions to see how these changes will affect you specifically.

Honestly, it feels like they're making it harder and harder for ordinary people to buy a home. These stamp duty changes are just another hurdle to jump over, and it's frustrating to see the goalposts constantly moving. It's going to be interesting to see how this affects the housing market in the long run, but right now, it just feels like another blow to those trying to get on the property ladder.

Future Of Employment Allowance

As we move further into 2025, the Employment Allowance is something I'm keeping a close eye on. It's designed to help smaller businesses manage their National Insurance contributions (NICs), and there have been some significant changes announced that could make a real difference. It's worth noting that all other eligibility requirements remain unchanged. To be eligible you must be a registered employer, be either a business, a charity with employees or a have more than two directors earning over the secondary threshold for class 1 National insurance.

Increased Allowance Limits

One of the biggest changes is the increase in the Employment Allowance itself. It's going up from £5,000 to £10,500, which is a substantial boost for eligible businesses. This means that businesses can reduce their employer NICs liability by up to £10,500 each tax year, freeing up cash flow that can be reinvested in growth or used to offset other rising costs. This is something that we will be automatically implementing for Menzies clients.

Eligibility Changes

Another key change is the removal of the £100,000 employer NICs threshold. Previously, only businesses with employer NICs liabilities of less than £100,000 in the previous tax year were eligible for the Employment Allowance. Scrapping this threshold means that more businesses, regardless of their size, can now benefit from the allowance, provided they meet the other eligibility criteria. This is a welcome change that will help a wider range of employers manage their payroll costs. It is worth noting that even if you are not paying any tax or NI to HMRC, it is still important to register for PAYE so that you can apply for state benefits going forwards. Your payroll provider can also help with this, ensuring that you don’t miss out on essential income.

Impact On Payroll Management

With these changes coming into effect, it's crucial to review your payroll management processes. Payroll systems may need to be adjusted to ensure the correct application of the allowance, especially if eligibility is expanded or revised. It's also important to ensure that you're accurately calculating and reporting your employer NICs liabilities to avoid any potential penalties. I'd recommend speaking to your payroll provider or accountant to ensure you're fully compliant with the new rules. The government announced at Autumn Budget 2024 that it will introduce legislation to move the responsibility for accounting for PAYE from the umbrella company to the agency that contracts with the end client to supply the worker’s services. In the event that there is no such agency in a labour supply chain, which is expected to be a minority of cases, this responsibility will be placed on the end client. As a result of this change, the Government expects that businesses that continue to use umbrella companies will take steps to prevent non-compliant umbrella companies from entering their supply chains, including those non-compliant umbrella companies that abuse the VAT flat rate scheme and Employment Allowance.

It's also worth noting that employees whose earnings are within IR35 off payroll working rules and employees employed for personal household or domestic work (unless they are care or support workers) cannot be included in your employment allowance claim.

Pension Taxation Adjustments

Okay, so pensions are getting a bit of a shake-up, and it's something I've been trying to get my head around. It's not exactly straightforward, but here's what I've gathered about the changes coming our way.

Abolition Of Lifetime Allowance Charge

Right, so the big one is the abolition of the lifetime allowance charge. Basically, this used to be a tax charge if your pension pot exceeded a certain amount. Now, that's gone. This could mean a significant change in how people plan for retirement, especially those with larger pension pots.

Changes To Taxable Estates

Now, this is where it gets a bit more interesting. From April 2027, pensions are going to be included as part of the taxable estate. This is a pretty big deal because it means that inheritance tax could come into play on pension pots, which wasn't always the case. It's something to keep in mind when thinking about estate planning.

This inclusion of pensions in the taxable estate from 2027 is a significant shift. It means that the value of your pension pot could now be subject to inheritance tax, potentially reducing the amount your beneficiaries receive. It's worth reviewing your estate plan to see how this change might affect your family's financial future.

Planning For Retirement

So, what does all this mean for retirement planning? Well, it means we need to think a bit differently. With the abolition of the lifetime allowance charge, there's potentially more flexibility in how much we can save into our pensions. However, the inclusion of pensions in taxable estates means we need to consider the inheritance tax implications. It's a bit of a balancing act, really. I think it's worth getting some professional advice to make sure I'm making the most of my pension contributions and planning for the future in the most tax-efficient way possible.

Here's a quick rundown of things to consider:

• Review your pension contributions in light of the abolished lifetime allowance charge.

• Consider the inheritance tax implications of including pensions in your taxable estate from 2027.

• Seek professional financial advice to optimise your retirement and estate planning.

Looking Ahead: Preparing for Tax Changes

As we approach the March 2025 budget, it's clear that businesses need to brace themselves for some significant tax changes. The adjustments to National Insurance and capital gains tax will likely affect many, especially those planning to sell their businesses. With the gradual increase in rates for Business Asset Disposal Relief, it might be wise for owners to consider their options sooner rather than later. Additionally, the new rules around company loans could catch some off guard, so staying informed is crucial. Overall, while these changes may seem daunting, with a bit of preparation and the right advice, businesses can navigate this new landscape effectively.

Frequently Asked Questions

What are the new National Insurance rates for businesses after April 2025?

From April 2025, employers will see National Insurance rates rise from 13.8% to 15%, and the earnings threshold will drop from £9,100 to £5,000.

How will Capital Gains Tax change for business owners?

Starting from April 2025, the tax rate for Business Asset Disposal Relief will increase from 10% to 14%, and then to 18% in April 2026.

What should I know about company loans and the S.455 charge?

The S.455 charge applies a tax if a shareholder owes money to their company and doesn't repay it within nine months. New rules will tighten how this charge is enforced.

What are the requirements for Making Tax Digital compliance?

Businesses with a taxable turnover over £85,000 must keep digital records and use specific software for VAT returns. Others will need to comply by April 2026 or 2027, depending on their income.

How will stamp duty thresholds change in 2025?

From April 2025, the stamp duty threshold for primary residences will drop from £250,000 to £125,000, affecting many property purchases.

What changes are expected for the Employment Allowance?

The Employment Allowance will increase from £5,000 to £10,500, and the eligibility threshold will be removed, benefiting more businesses.