Personal tax

Income tax and NI

There will be no changes to the bands and rates of income tax, dividend tax or NI. However, the ongoing freeze on the personal allowances and thresholds will be removed from 2028.

Class 2 and 3 NI contributions will increase by 1.7% from April 2025. These are now only payable on a voluntary basis.

All ISA limits will remain unchanged until 2030. The British ISA proposed at the 2024 Spring Budget has been scrapped.

Employed individuals will be able to report Child Benefit payments through their tax code from 2025, and pre-prepopulate Self Assessment tax returns with Child Benefit data for those not using this service.

MTD ITSA

Making Tax Digital (MTD) for Income Tax will be extended to sole traders and landlords with income over £20,000 by 2029. This expands the rollout of MTD for Income Tax, which will begin from:

• April 2026 for sole traders and landlords with income over £50,000
• April 2027 for those with income over £30,000

Capital gains tax (CGT)

The rates of CGT applicable to general capital assets have been brought into line with those for residential property for disposals made on or after 30 October 2024. The rates for shares etc will now be 18%/24%.

The hybrid rate applicable to carried interest also increased to 32%.

CGT reliefs

In a blow to small business owners, the rates for business asset disposal relief BADR will increase, first to 14% from April 2025, then 18% from April 2026, i.e. aligned with the new lower CGT rate. Those realising gains within the lifetime limit will see an effective 80% increase in CGT payable.

Example

Andy realises a qualifying gain of £1million in 2024/25, paying CGT of £100,000. Barry realises a gain of the same amount in 2026/27. His CGT bill is £180,000.

BADR is only available to shareholders that are officers/employees of the company, and only where (broadly) 5% of the ordinary shares are held. Investors’ relief (IR) offers a similar treatment for outside investors in trading companies. The lifetime limit for IR was not reduced when the corresponding limit for BADR, and remained at £10 million.

Legislation will be introduced in Finance Bill 2024/25 reducing the IR lifetime limit to £1 million from 30 October 2024. It will be necessary to aggregate previous claims in order to establish how much of the limit is left (if any).

Business taxes

Capital allowances

The 100% first-year allowances for zero-emission cars and electric vehicle charge-point are extended until 2026.

Company cars

The appropriate percentages for zero emission and electric vehicles will increase by 2 percentage points per year in 2028/29 and 2029/30, rising to an appropriate percentage of 9% in tax year 2029/30.   

The appropriate percentages for all cars with CO2 emissions of 1 to 50g/km, including hybrid vehicles, will rise to 18% in tax year 2028/29 and 19% in tax year 2029/30.    

The appropriate percentages for all other vehicle bands will increase by 1 percentage point per year in tax years 2028/29 and 2029/30. This will be to a maximum appropriate percentage of 38% for tax year 2028/29 and 39% for tax year 2029/30.  

Employment related taxes

Employers' NI

NI relief for employers hiring qualifying veterans is extended for a further year from 6 April 2025 until 5 April 2026, meaning no secondary Class 1 will be payable up to annual earnings of the Veterans Upper Secondary Threshold of £50,270 for the first year of a veteran’s employment in a civilian role.

A number of changes have been announced to how secondary Class 1 will apply from April 2025. The rate will increase from 13.8% to 15%. The payment threshold will be cut from £9,100 to £5,000 at the same time.

In some good news, the employment allowance will increase to £10,500 (from £5,000) and remove the restriction which restricts the allowance to employers with a secondary contributions liability of less than £100,000 in the prior tax year.

Cars, vans and fuel

The following new rates will come into effect from 6 April 2025:

• the van benefit charge will be £4,020 in tax year 2025/26
• the van fuel benefit charge will be £769 in tax year 2025/26
• the car fuel benefit charge multiplier will be £28,200 in tax year 2025/26

Inheritance tax (IHT)

Unused pension funds will be brought within the charge to IHT from April 2027. It appears that the responsibility for reporting and payment of the tax will fall on the scheme provider.

The generosity of Agricultural Property Relief and Business Property Relief is to be severely curtailed. Currently, there is no upper limit to the value of qualifying assets that can enjoy the relief, whether at the 100% rate or the 50% rate.

From April 2026, it is proposed that relief will be restricted to the first £1million of qualifying assets. For farmers, this limit will be combined, i.e. it is the total available for both agricultural and business assets. The move has been met with anger by the farming community, many of whom are pointing out that the relatively low threshold will hit many family-owned farms which may have been inter-generational for hundreds of years.

Where the £1 million is exceeded, relief will reduce to 50%.

In a further blow to family companies, the applicable rate of relief for unquoted shares will reduce to 50%, i.e. with no £1 million threshold. Private company shares whose value is not covered by any available nil rate band will attract IHT at an effective rate of 20%.

The Prime Minister’s subsequent, and somewhat blasé, comment that the amount due can be paid over a period of up to ten years is unlikely to placate many, especially coupled with the hike in the BADR rate.

These measures will be subject to consultation, so it may be that representations from the professional bodies will be able to secure concessions ahead of any implementation.