New UK Tax Laws in 2025: Income Tax, VAT & Business Tax Key Changes

As the tax system in the UK keeps evolving, the people and the companies need to be on their toes regarding the new 2025/26 tax law. The updates include income tax, National Insurance contributions, capital gain, company tax, and payroll legislation.

For those currently preparing their tax returns or for companies actively looking for financial counsel, it is of utmost importance to be abreast with these changes because being in sync with tax legislation is important and optimally aligning tax planning approaches is important as well. If you are based in Watford, then it would be of great help to employ a Tax Accountant or a Tax Advisor based in Watford to assist you in coping with these changes more effectively and better.

1. The Different Income Tax Rates and Relative Thresholds

For the 2025/26 tax year, income tax rates are as follows:

• Personal Allowance: £12,570
• Basic Rate (20%): £37,700 or less
• Higher Rate (40%): £37,701 to £125,140.
• Additional Rate (45%): Over £125,140 

Scotland and Wales both have their own tax bands. For more information visit gov.uk.

2. National Insurance Contributions (NICs)

Significant and noteworthy changes are as follows:

• Employee Contributions:

             •  Primary Threshold: £242/week

             •  Upper Earnings Limit: £967/week

•  Employer Contributions:

             •   Secondary Threshold: £96/week

             •   Contribution Rate: From 13.8% increased to 15% 

Employers are advised to review their payroll calculation as well as bookkeeping practices to incorporate the necessary changes for these rises. For more insights read our guide on Employer NIC Rate Increase 2025.

3. Capital Gains Tax (CGT)

• Higher Rate for Residential Property Gains: Increased from 28% to 30%
• Annual Exempt Amount: Cut from £12,300 to £6,000

For landlords and business owners, the reforms would have a big impact on their net tax liabilities.

4. Inheritance Tax (IHT) Reforms

• Business & Agricultural Relief Ceiling: Limited to £1 million for 100% relief, with those over this paying 50% relief.

In estate planning, it is important to consult a professional tax individual.

5. Abolition of Non-Domiciled (Non-Dom) Tax Status

In the past, UK citizens were able to evade tax on foreign earnings. That system is eliminated now, and it impacts high-net-worth individuals.

6. Amendments to the Vehicle Excise Duty (VED)

• Electric vehicles currently taxed at standard VED levels
• Band A (low-emission category) was removed

7. Late Payment Charges

• Higher penalties for late submission of self-assessment tax and VAT returns (from 2-4% to 3-10%).

8. Amendments to Tax Law on Double Cab Pick-Up Vehicles (DCPUs)

• DCPUs are now taxed as vehicles for tax purposes, with implications on capital allowances and benefit-in-kind computations.

9. Council Tax Increases

• The local government may increase the council tax up to the maximum which is as much as 5%.

10. Contemporary Trends in Employment Law

• The Paternity Leave (Bereavement) Act of 2024 is a significant piece of legislation that creates and provides new rights to employees.

How Fair View Accountants Can Help

Fair View Accountants provides individualized business consultations, payroll, bookkeeping, and tax return preparation to allow clients to react to such tax reforms. Get expert advice from us online.

Conclusion

These newly introduced tax reforms irrefutably place a firm and unbending emphasis on the critical and imperative need for individuals and businesses to engage in strategic tax planning. Whether you are an individual taxpayer or a businessman operating your own business, having a professional and qualified Tax Advisor who is located in Watford ensures that you are in full compliance with the current laws and regulations. This also ensures that you are in a position to achieve maximized financial management tailored to your own situation. Therefore, we strongly advise you to call and contact Fair View Accountants today so that you can fully enjoy their professional services in connection with all your taxation issues.

FAQs

What is the personal allowance for 2025/26?

The standard personal allowance is £12,570.

Has National Insurance been raised?

Yes, the employer contributions increased from 13.8% to 15%.

How does the CGT change impact property owners?

The highest rate has risen to 30% from 28%, raising tax liability on residential property gains.

Are electric vehicles still being exempted from road tax payments?

No, they are now liable for standard VED rates.

What are the consequences that I can face if I fail to file my tax return within the specified deadline?

Penalties have increased from 2-4% to 3-10%.

Will council tax rise in 2025?

Actually, local authorities are able to increase it by up to 5%.

Who are the people and groups hurt by the now-abolished non-dom tax status?

High-net-worth individuals who had previously avoided UK tax on foreign earnings.

What are the new business and agricultural relief limits for IHT?

Relief is limited to £1 million for 100% relief, and any excess over this is awarded 50% relief.

What exactly changed in double cab pick-up trucks? 

Now, these vehicles have been duly categorized as cars for tax purposes, which in turn brings a significant effect on various allowances and benefits accruing to them.

If I were looking for a tax accountant in the Watford region, where would I most probably go to look for one? 

Fair View Accountants offers expert tax planning and business advice in Watford. Contact us here.