Everything That’s Changing In The 2025/26 Tax Year

As the end of the tax year approaches, many of the changes announced in the latest Autumn Budget come into effect. Many of these directly affect companies and business owners, with the cost of hiring and maintaining staff set to increase. These changes include, first and foremost, the Capital Gains Tax and BADR rates as well as Employers’ NICs, Employer Allowance and National Living Wage.

There are also changes to alcohol duty, apprenticeship levy, parental leave and other policies that affect workers and small business owners across the UK, and in particular the new Scottish Income Tax band and rates. However, this article will focus on the changes that will most significant to startups and tech entrepreneurs.

Capital Gains Tax (CGT) Regime Overhaul

Of course, the most significant change for business owners in the new tax year is the overhaul of the current Capital Gains Tax (CGT) regime. The main rates of CGT have already increased from 10% to 18% and from 20% to 24% for disposals made since 30 October 2025.

Additionally, from 6 April 2025, the discounted CGT rate that applies to Business Asset Disposal Relief and Investors’ Relief will increase from the current level of 10% to 14%. As we have covered in a previous report, this has ripple effects that apply to schemes such as EMI Share Options.

The tax year after next, therefore from 6 April 2026, this rate will increase by a further 4% to align with the base CGT rate of 18%.

Employer’s NICs Increase & Changes to Employment Allowance

From 6 April 2025, the rate of Employer’s National Insurance Contributions (NICs) will be 15%, up from the current rate of 13.8%. In addition, the secondary threshold (at which employers start to pay NICs) will be cut from £9,100 to £5,000.

To protect smaller businesses from the NICs increase, the Employment Allowance will increase accordingly to £5,000 to £10,500 per year, starting on 6 April 2025, while removing current the £100,000 threshold for eligibility, effectively meaning that all employers with NIC payments can benefit from Employment Allowance.

NIC Changes for Employees and the Self-Employed

From April 6th, both the Lower Earnings Limit (LEL) and Small Profits Threshold (SPT) rates will see a 1.7% increase. This means that the LEL will increase to £6,500 and the SPT will increase to £6,845 per year.

The LEL is the minimum amount an employee must earn before they start owing employee NICs. Similarly, The SPT is the level of annual profit above which a self-employed person is required to pay Class 2 NICS.

Minimum Wage and Statutory Pay Increases

Effective April 1st, the National Living Wage will increase to £12.21 per hour for employees aged 21 and above.

Consequently, the National Minimum Wage rates will increase to the following:

• £10 for employees aged 18-20
• £7.55 for employees who are under 18 and apprentices

Along with NLW, statutory parental and sick pay are also set to rise in the 2025/2026 tax year, with the the small Employer’s Relief Rate rising accordingly.

• The Statutory Parental Pay will increase to £187.18 per week
• The Statutory Sick Pay (SSP) will rise to £118.75 per week
• The Small Employers’ Relief (SER) will increase from 103% to 108.5% (100% + 8.5% compensation).

This means eligible small employers (those who paid £45,000 or less in Class 1 NICs in the last year) will be able to reclaim 100% of statutory payments, plus an additional 8.5% relief from HMRC in 2025/26.

Larger employers can still reclaim 92%.

Voluntary Making Tax Digital (MTD) Sign Up

From April 6th, sole traders and self-employed individuals can choose to start implementing Making Tax Digital for Income Tax, even ahead of the mandatory deadline of the April 2026, when MTD becomes mandatory for sole traders and landlord with an annual income of £50,000 or more.