In 2025, the UK government has rolled out significant tax reforms, aiming to modernise revenue collection, incentivise sustainability, and close loopholes. These changes impact individuals, investors, and businesses alike. Here’s a breakdown of the key developments.
1. Income Tax Adjustments
While the personal allowance remains at £12,570, inflationary wage growth means more earners are nudged into higher brackets. The threshold for the 40% higher-rate tax has not kept pace, causing fiscal drag. Strategic salary structuring and pension contributions can help manage liabilities.
2. Capital Gains Tax (CGT)
The CGT exemption has been halved to £3,000, meaning more people face tax when selling shares, property (not main homes), or other assets. Spreading asset sales across tax years and using ISA allowances can reduce exposure.
3. National Insurance and Dividend Tax
Dividend allowances have dropped further, affecting investors and small company directors. Combined with increased National Insurance thresholds for employees, this presents mixed impacts. Utilising ISAs or restructuring income to optimise taxation is now more crucial.
4. Business and Corporate Taxation
Corporation Tax remains at 25% for large companies, while small profit businesses continue at 19%. R&D incentives have been revised to focus on technological innovation, especially in green industries. Businesses must ensure accurate claims and documentation.
5. Green Tax Incentives
To support the net-zero agenda, tax credits and deductions are now available for eco-investments—solar panels, EV fleets, and energy-efficient upgrades. These incentives apply to both homeowners and SMEs and can reduce costs significantly.
6. Digitalisation and Compliance
The government’s push towards Making Tax Digital (MTD) requires digital record-keeping and quarterly updates for more taxpayers, including sole traders and landlords. Preparation and compatible software are essential to avoid penalties.
7. Estate and Inheritance Tax (IHT)
While the IHT threshold remains unchanged, new reporting rules have increased scrutiny over gifts and transfers. Early planning using trusts or gifting strategies is recommended to minimise tax burdens.
Tax reforms in 2025 demand a proactive approach. Regular reviews with tax professionals can ensure compliance and optimise financial outcomes.