What are the latest tax changes the self-employed and small businesses need to know about? There are usually new UK tax brackets and other updates introduced each year, often coming into force at the start of the new financial year in April.
So here are eight business tax changes to understand, from National Insurance and national living wage increases to Making Tax Digital and business rates changes.
8 tax changes small businesses need to know
The new tax year starts on 6 April every year, and with that often comes a range of new tax rates and thresholds. Here’s a summary of the latest tax changes for 2024-25 and 2025-26:
- Personal allowance rates
- Income tax brackets
- National Insurance reforms
- National minimum wage rates
- Dividend tax changes
- Making Tax Digital
- Business rates
- Working tax credits
1. What’s the personal allowance?
The personal allowance for 2024-25 and 2025-26 will remain at £12,570. This is how much you can earn tax free.
The government has frozen this tax allowance until 2028. Businesses and taxpayers in general are facing rising costs, so could feel the pinch of this personal allowance freeze.
And over the long-term, if earnings rise and the personal allowance stays the same, then you’ll pay more in tax.
It was announced as part of the Autumn Budget 2024 that the personal allowance and income tax thresholds will increase in line with inflation from 2028-29.
2. UK tax brackets for income tax
These are the income tax rates and thresholds the self-employed should be aware of:
- basic rate – 20 per cent on income between £12,571 and £50,270 – you pay tax on £37,700
- higher rate – 40 per cent on income between £50,271 and £125,140
- additional rate – 45 per cent on income above £125,140
There are different bands and rates for Scotland.
3. National Insurance for employers to rise
If you’re an employer, or also have income from employment, you’ll need to pay Class 1 National Insurance contributions (NICs).
From April 2025, the rate at which employers pay NICs will increase by 1.2 per cent to 15 per cent.
At the same time, the threshold at which employers start paying NICs on an employee’s salary will fall from £9,100 to £5,000.
To protect small businesses that employ people from having to pay more National Insurance, the government will increase the employment allowance from £5,000 to £10,500.
It’s estimated that the new system will see over one million employers pay the same amount of National Insurance, while 865,000 employers won’t pay any at all.
Self-employed continue to benefit from lower NICs
Since April 2024, the self-employed have no longer been required to pay Class 2 National Insurance. They’ve also benefited from a lower main rate of Class 4 NICs.
Read more: How to pay National Insurance when self-employed or running a business
4. Changes to wage rates for employers
As part of the Autumn Budget 2024, Chancellor Rachel Reeves announced a range of changes to the wage rates paid by employers.
| Rate from April 2024 | Rate from April 2025 | Percentage increase | |
| National living wage (21+) | £11.44 an hour | £12.21 an hour | 6.7% |
| National minimum wage (18-20) | £8.60 an hour | £10 an hour | 16.3% |
| National minimum wage (16-17) | £6.40 an hour | £6.40 an hour | 0% |
| Apprentice rate | £6.40 an hour | £7.55 an hour | 18% |
It’s estimated that the new national living wage will see approximately three million workers benefit from a £1,400 annual pay rise.
The changes to the national minimum wage are the biggest increase on record. The government’s eventual aim is to have a single adult rate national living wage.
5. Tax rates for dividends
The dividend tax rate is staying the same for the 2024-25 and 2025-26 tax years.
However, the dividend allowance was cut from £1,000 to £500 for the 2024-25 tax year onwards. This means you’ll pay dividend tax on the dividends you earn above £500 at these rates:
- basic rate taxpayers – 8.75 per cent
- higher rate taxpayers – 33.75 per cent
- additional rate taxpayers – 39.35 per cent
6. Making Tax Digital on track for April 2026
Self Assessment taxpayers have until April 2026 to start using Making Tax Digital (MTD) for income tax. Initially this will apply to those with an income over £50,000. Those earning over £30,000 will need to use the system from April 2027.
The government confirmed in the Autumn Budget 2024 that it will expand MTD to those with incomes over £20,000 by the end of the current parliament.
Making Tax Digital was first rolled out in 2019 for VAT-registered businesses with a taxable turnover of more than £85,000. And it came in for all other VAT-registered businesses in 2022.
This system requires businesses to keep digital records and file VAT returns digitally.
7. Changes to business rates
Retail, hospitality, and leisure businesses should be aware of the latest business rates changes.
Business rates are now based on a new rateable value. This is to take into account changes in property value since 2017.
This was first introduced in April 2023, but the government brought in a relief for retail, hospitality, and leisure businesses to help with the transition.
The relief, capped at £110,000 for each business, is currently set at 75 per cent, but will drop to 40 per cent for the 2025-26 tax year.
It was also announced as part of the Autumn Budget 2024 that the small business multiplier will remain at 49.9p for 2025-26, while the standard multiplier will increase to 55.5p.
You can estimate your business rates using the government’s online calculator. There are different rates for businesses with premises in Scotland and Northern Ireland.
8. Tax credits – self-employed changes
Working tax credits are coming to an end, and people claiming solely working tax credit should have been migrated to Universal Credit before the start of the 2024-25 tax year. The remaining people claiming will be migrated by the start of the 2025-26 financial year.
Make sure you check your tax credits information and how this could impact your Self Assessment.
Other UK tax changes to look out for
- the lower rate of capital gains tax increased from 10 per cent to 18 per cent, and the higher rate from 20 per cent to 24 per cent on 30 October 2024 (excluding property sales)
- a 5p cut in fuel duty has been extended for another two years
- the new and basic state pension will both increase by 4.1 per cent from April 2025
- one year to go until the new HMRC penalty points system comes in for Self Assessment taxpayers (starting in April 2026 for those with an income over £50,000)
Please use this article as a guide and get professional tax advice on self-employed tax brackets if you’re not sure about anything.
Small business guides and resources
- How to do your Self Assessment tax return
- What is HMRC’s Time to Pay service?
- Do you have to pay tax on cryptocurrency?
- What type of business insurance do I need?
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