April tax increases: how to reduce their impact on your finances

2nd April 2025

Tax increases in April

A number of tax changes were announced in the Autumn 2024 Budget, which it will be crucial to understand when the 2025/26 tax year begins. Here is an overview of the points you’ll need to be aware of from 6 April 2025, alongside some tips on how to reduce their impact on your finances.

Capital Gains Tax changes

The Capital Gains Tax (CGT) rates on the sale of any assets other than residential property rose on 30 October 2024. The basic rate increased from 10% to 18%, while the higher rate changed from 20% to 24%.

The CGT carried interest rate increases from 18%/28% to 32% on 6 April 2025. This is payable on carried interest received by those who provide investment management services to investment funds.

Meanwhile, Business Asset Disposal Relief (BADR) is increasing from 10% to 14% from April 2025. It will then rise again to 18% in April 2026.

Tax-efficiency tips:

Ensuring you utilise your annual CGT allowance of £3,000 each year will help to mitigate the impact of the increases. Annual CGT exemption does not roll over into the next tax year, so seek advice on disposing of assets efficiently.

Similarly, professional guidance will help you determine when and how best to dispose of business assets over the next two years.

Employer NIC changes

On 6 April 2025 the rate of employers’ National Insurance Contributions (NICs) will increase to 15%. Employer contributions will also become payable at £5,000 instead of £9,100. As such, many businesses will find themselves with larger NI bills.

Tax-efficiency tips:

Consider implementing a salary sacrifice scheme whereby employees agree to reduce their salary in exchange for certain benefits such as a car or gym membership.

Employment Allowance

Employment Allowance increases from £5,000 to £10,500 per year on 6 April 2025. This helps eligible employers to reduce their National Insurance bill and supports smaller businesses with rising costs.

Tax-efficiency tip:

Be sure to check whether your business becomes eligible for Employment Allowance in April. You cannot make a claim if your company has only one employee paid above the Class 1 NI secondary threshold and the employee is also a director of the business.

National Minimum Wage

The National Living Wages increase to the following from 6 April 2025:

Aged 21 and over: £12.21 per hour
Aged 18-20: £10 per hour
Under 18s: £7.55 per hour

Be prepared for the impact this will have on your company’s cashflow.

Furnished Holiday Let (FHL) cessation

The FHL scheme ceases from 1 April 2025, meaning there will no longer be tax advantages to running short term lets. Capital allowances on the sale of such property will no longer be eligible for Business Asset Disposal Relief, and there will be restricted finance costs for FHL businesses.

Businesses and individuals affected by the changes being implemented from April should seek advice from a reputable accountant or financial advisor in order to navigate them successfully.