With global news and tariffs taking up the headlines over the last few days, it can be easy to forget that, on a domestic level, we are starting a new tax year.
So, now we are at the start of the 2025/26 tax year, what can we expect? That we know of: increased National Insurance, the demise of the “non-dom” regime, reduced capital gains tax reliefs, and the start of the new foreign income and gains (FIG) regime… so, it is already not a quiet one.
Tax Changes for Employers
The increase in employers’ National Insurance Contributions (NICs) from 13.8% to 15% came into effect from 6 April 2025 but that is not the end of the story for employers. The National Living Wage is increasing by 77p to £12.21, along with a substantial increase of £1.40 in the 18-21 National Living Wage to £10 per hour with effect from 1 April 2025.
Combined with a drop in the threshold of where employers start to pay employers’ National Insurance, employment costs have risen sharply. As an example, the cost of employing a person on a salary of £35,000 per year has increased by around £926 per year – not an insignificant amount.
Find out more about tax changes for employers from our experts.
Changes for Remittance Basis Taxpayers
After the last few years of changes and a flurry of activity before 5 April 2025, the “non-dom” regime is no more. However, this does not mean the end of the remittance basis for those who have claimed it previously and continue to live in the UK – in fact, its definition was widened in the Finance Act 2024-25.
Some may choose to utilise the Temporary Repatriation Facility (TRF) if they need to bring overseas funds to the UK at the beneficial rate of 12% (compared with potentially 45%) which I think will be increasingly popular over the next couple of years.
Whether they use the TRF or not, remittance basis taxpayers will still need to be careful to ensure that they do not create unexpected remittances to the UK in the future.
Changes to Capital Gains Tax (CGT)
The capital gains tax (CGT) rate was increased to 24% immediately from 30 October 2024. Some CGT changes were delayed until after 5 April 2025 such as the increase in the tax rate on disposals that qualify for Business Asset Disposal Relief (BADR) from 10% to 14%. It will increase again to 18% from 6 April 2026, which is something to bear in mind if you are planning on making any qualifying disposals this tax year.
The New Foreign Income and Gains (FIG) Regime
The new Foreign Income and Gains (FIG) regime has officially started. If you arrive in the UK and have not been UK resident in the previous 10 tax years, you can qualify for the FIG regime for the first four years of your UK residence. Everyone else is subject to worldwide taxation.
The FIG regime exempts most non-UK income and capital gains for the first four years irrespective of whether you bring the funds to the UK now or in the future. There is no fee for the FIG regime (unlike other jurisdictions). We expect taxpayers to claim the FIG regime through their tax return although we do not know the details yet.
We are already seeing an influx of people moving to the UK to benefit from the regime. The hope is that they will like it so much that they decide to stay longer than their four years.
Changes to Agricultural Property Relief (APR) and Business Property Relief (BPR)
While there are a number of changes already happening, there are changes on the horizon that will continue to keep private client advisors busy over the coming months. The proposed introduction of a £1 million combined cap for Agricultural Property Relief (APR) and Business Property Relief (BPR) is due to come into effect from 6 April 2026.
There is a window of opportunity for those who would prefer the certainty of a 6% inheritance tax (IHT) charge every ten years (rather than an 40% IHT liability on death) which closes on 6 April 2026. Family business should definitely consider this in the coming months as doing nothing should always been a conscious action rather than a missed opportunity.
Future Outlook: Anticipation for the Autumn Budget
The Chancellor promised us only one fiscal event per year to increase certainty for families and she kept to her word for the Spring Statement which did not include any tax changes. This has left some already starting to build the anticipation for the Autumn Budget which is supposed to be our annual fiscal event.
We know that the Chancellor has limited headroom to make tax cuts and, given the current tariff rift with the US and the increased defence spending, it does seem likely that we will see tax increases announced in the autumn.
Employers are still recovering from the increases to the NIC which have just come into force so it would be unpopular to increase employer costs any further. The Chancellor has reiterated her intention to protect the pay of the working people which leaves the wealthy as a natural target. Increases to the dividend rate, introduction of a gift tax or even a new wealth tax have all been mentioned.
Our recommendation? Get good tax advice sooner rather than later and don’t leave it to the last minute, as there is a real possibility that all the good tax advisors will be at capacity as we move towards the end of this tax year.
As always, please contact one of our partners to discuss any matters that could impact you or your business.
