New HMRC Rules Every Business Owner Must Know in 2025

From 6 April 2025, a new tax year begins, bringing important changes for businesses across the UK. These include updates to business rates, Employment Allowance, National Minimum Wage, and strengthened compliance measures under Companies House reforms.


While many of the reforms were already signalled in earlier Budgets, 2025 is the first year that some of them take effect. Others, such as Making Tax Digital for Income Tax Self Assessment, are not yet in force but require preparation.


This guide sets out the new HMRC rules every business owner must know in 2025, helping you prepare early and avoid unexpected costs.


Key Changes for the 2025/26 Tax Year

Income Tax and Dividends

  • Tax thresholds remain frozen, which means more people are drawn into higher tax bands as wages rise.
  • The dividend allowance remains at £500, having been reduced in April 2024.
  • Dividend tax rates are 8.75%, 33.75%, and 39.35% depending on your income band.


Action point: Small business owners relying on dividends should plan carefully to manage tax exposure.


Capital Gains Tax

  • The Annual Exempt Amount is fixed at £3,000 for individuals and £1,500 for most trusts.
  • Proceeds above £50,000 must be reported, regardless of whether tax is due.


Action point: Keep good records of property or share disposals and consider spreading gains across multiple tax years where possible.


National Insurance and Employment Allowance

  • From 6 April 2025, the Employment Allowance increases from £5,000 to £10,500. Additionally, the previous £100,000 annual Class 1 National Insurance liability cap has been removed, making more businesses eligible for this allowance.
  • Thresholds for employee and self-employed contributions remain frozen, meaning higher effective contributions in real terms.


Action point: Ensure your payroll system applies the higher allowance from the first month of the new tax year.


Employer National Insurance Contributions

  • The rate increases from 13.8% to 15% from 6 April 2025
  • Secondary threshold reduces from £9,100 to £5,000 per employee
  • These changes significantly increase employer costs, which the higher Employment Allowance partly offsets


Making Tax Digital

  • MTD for VAT is already mandatory for all VAT-registered businesses.
  • MTD for Income Tax Self Assessment has been delayed:
  • - From April 2026: businesses and landlords with income above £50,000
  • - From April 2027: those earning over £30,000
  • - From April 2028: those earning over £20,000 (planned)


Action point: While not compulsory yet, moving to digital software now will reduce stress when MTD goes live.


Payroll: National Living Wage and Minimum Wage

From 1 April 2025, the following apply:

  • National Living Wage (age 21 and over) increases to £12.21 per hour.
  • Ages 18-20: £10.00 per hour
  • Ages 16-17: £7.55 per hour
  • Apprentice rate: £7.55 per hour


Statutory Leave and Pay

  • Paternity leave reforms, effective since March 2024, continue in 2025. Eligible employees can now take two separate one-week blocks within the first year after birth or adoption.
  • Neonatal Care Leave and Pay is expected but not yet in force as of April 2025.
  • Statutory Sick Pay remains unchanged, with waiting days still applying.
  • Sexual harassment prevention duties for employers came into force in October 2024, requiring reasonable steps to protect employees.


Action point: Update HR policies to reflect these entitlements and duties.


Companies House Reforms

  • All companies must provide a registered email address and maintain an appropriate registered office.
  • Identity verification for directors and Persons of Significant Control is planned but not yet compulsory for all in 2025.


Action point: Ensure company records are up to date and prepare ID documents for verification when required.


Business Rates

From 1 April 2025 to 31 March 2026 in England:

  • Small business multiplier: 49.9p
  • Standard multiplier: 55.5p
  • Retail, hospitality and leisure relief continues at 40%, capped at £110,000 per business.


Action point: Check with your local council if you qualify for relief and apply promptly.


Company Cars

  • Benefit-in-kind (BIK) rates are published in advance and remain a key cost consideration for employers providing cars.
  • Advisory Fuel Rates are updated quarterly, so employers must use the latest figures for reimbursements.


Action point: Always check the current rates before processing payroll or expense claims.


Property and Foreign Income

  • UK residents must declare worldwide income, including foreign dividends, interest, or rental profits.
  • Property owners face tighter reporting obligations and reduced allowances compared with previous years.


Action point: Complete the Self Assessment accurately and claim available reliefs where applicable.


Compliance Calendar for 2025/26

  • 1 April 2025 – New minimum wage rates and business rates apply.
  • 6 April 2025 – New tax year; Employment Allowance increases to £10,500.
  • 31 October 2025 – Paper Self Assessment deadline for 2024/25.
  • 31 January 2026 – Online Self Assessment deadline for 2024/25.
  • Quarterly – Advisory Fuel Rates updated; check before reimbursing staff.


FAQs

  • Do the new HMRC rules mean I must join Making Tax Digital now?

    No. MTD for Income Tax starts in April 2026 for incomes above £50,000, and in April 2027 for incomes above £30,000.

  • What is the biggest cost saving in 2025?

    The increase in the Employment Allowance to £10,500 offers substantial NIC savings for eligible businesses.

  • Has Statutory Sick Pay changed in 2025?

    No. Waiting days and the lower earnings limit remain in place.

  • What are the new minimum wage rates?

    The National Living Wage increases again from 1 April 2025, covering all workers aged 21 and over. Other minimum wage bands rise, too.

  • Do directors have to verify their identity with Companies House in 2025?

    Not yet. Identity verification is planned but not fully rolled out. What is compulsory now is having a registered email and a proper registered office address.



  • What is the Capital Gains Tax allowance?

    It is fixed at £3,000 from 6 April 2024 and remains the same in 2025/26.

  • How do the employer National Insurance changes affect small businesses?

    While employer NIC rates increase to 15% and thresholds decrease to £5,000, the doubled Employment Allowance (£10,500) will offset much of this cost for eligible small businesses.

Conclusion

The new HMRC rules that every business owner must know in 2025 focus on payroll, allowances, and compliance. Key actions include applying the larger Employment Allowance, updating payroll for the new minimum wage rates, maintaining accurate Companies House details, and preparing for the digital tax future.


By planning early and seeking professional guidance, you can reduce risk, improve compliance, and make the most of the reliefs available to your business.


At 10.CA, we help UK businesses stay ahead of HMRC rules. Whether you’re a sole trader, small business, or limited company, our experts can guide you through tax, payroll, and compliance changes for 2025 and beyond.


Disclaimer: This guide summarises the current key changes for 2025. Tax legislation is complex, and individual circumstances differ. Check GOV.UK for official updates and consult a qualified advisor before taking action.

Company tax returns and accounts have gone digital

By Charlie Flockhart • April 21, 2026
HMRC and Companies House have confirmed that from 1 April, all businesses must use compliant, commercial software to file their company’s tax returns. As of 31 March, the free joint online service, commonly known as the CATO portal, from these two Government bodies has been removed and you must now use software to file company tax returns to HMRC. For the time being, you will still be able to file annual accounts at Companies House using third-party software, WebFiling services or paper filing. The decision has been made to end this service as it is “outdated and no longer aligns with modern digital standards”, according to Companies House. This change is in line with the introduction of the Economic Crime and Corporate Transparency Act, which implemented “enhanced corporation tax requirements and changes to UK company law.” It also follows on from a major IT security breach at Companies House, identified in March 2026, that exposed the WebFiling system and allowed some users to potentially access and amend the details of other companies. Although the breach has now been resolved and security strengthened, it has raised concerns about the reliability of GOV.UK One Login service.  Can you still amend previous returns using the free service? HMRC and Companies House have confirmed that now that the free filing service has closed, company directors will have to use commercial tax software if they need to make changes to a previously submitted Corporation Tax return or refile a rejected return. From now onwards, any previously filed financial information will no longer be available in the system, as it has not been retained and will need to be entered again. HMRC has said that, for amendments, it will also be acceptable to send a paper return to the Corporation Tax Services office. If you have previously filed financial accounts with Companies House and you want to make changes or corrections, this will also need to be done via commercial software or by sending paper accounts to Companies House via post. Are there any exceptions to this new rule? Companies can file a paper Corporation Tax return only in limited circumstances, such as if they wish to submit it in Welsh or can demonstrate a valid, reasonable excuse to HMRC. Otherwise, returns must be filed online using commercial software. If you are affected by this change and need help choosing and utilising commercial software to complete your Corporation Tax return, please speak to our team.

Capital allowances - New rules for a new tax year

By Charlie Flockhart • April 21, 2026
Capital allowances continue to provide an effective method for businesses to reduce their tax bills, by providing incentives for investment in eligible expenditure – typically plant and machinery. Historically, these reliefs have been subject to change and the 2026/27 tax year is no different, as the Government moves to alter two key reliefs – Writing Down Allowance (WDA) and a new First-Year Allowance (FYA).  Reduction of the Writing Down Allowance The WDA will be reduced from 18 per cent to 14 per cent on the main pool of qualifying plant and machinery assets. This change has been introduced on two different dates, starting with companies subject to Corporation Tax on 1 April and followed shortly thereafter by those subject to Income Tax, such as sole traders and partnerships, from 6 April. Businesses with large brought forward main pool expenditures are expected to lose the most from the reduction in the main rate of WDA. In the long-term, the change may also reduce incentives for investment in second-hand assets and cars, which benefited under the previous rules. The new First-Year Allowance To offset some of the impact of the reduction in WDA, a new 40 per cent FYA on main rate expenditure, primarily still covering plant and machinery, will now be available. This new FYA is intended to encourage investment in areas where other FYAs don’t allow, in particular, assets bought by unincorporated businesses and leases. Sole traders and partnerships will, for the first time, be able to get additional support at the point of investment, which means that more businesses will be able to reduce their tax bill in the same year as their investment. This is expected to give a quick cashflow boost to those affected and provide additional support for future investments. However, it is important to note that this FYA does not support investment in second-hand assets, cars or leased assets in other countries. Finally, the Government has also confirmed that small business owners will continue to benefit from tax relief on electric vehicles, as the 100 per cent FYA for zero-emission vehicles and charge points has been extended until 31 March 2027 for Corporation Tax and 5 April 2027 for Income Tax. This gives businesses greater certainty when planning ahead, while also providing a strong financial incentive to invest by reducing tax bills upfront. Want to make more of capital allowances? If you think you may be eligible for capital allowances, either due to the changes outlined in this article or more generally, then it is important that you claim the tax relief available to you. If you would like help reviewing the current capital allowances that your business can claim, please get in touch.

Government abolishes work-from-home relief

By Charlie Flockhart • April 21, 2026
Directors and employees claiming work-from-home tax relief will no longer be able to claim it from the start of the new tax year – 6 April 2026. Why is this relief being taken away? The Chancellor announced the removal of the work-from-home relief as part of her latest Autumn Budget. The main reasoning given for the abolition is that it will support the nation’s deficit reduction. HMRC has also said that it no longer believes it is fit for purpose or easy to police. Who could claim work-from-home relief? Work-from-home relief has been utilised by homeworkers since the early 2000s, helping them offset some of the costs of heating, lighting, broadband and other home-office expenses required to complete their jobs. The relief allowed employees and directors to claim a flat rate of £6 per week or a deduction for actual costs. However, those who do not claim the flat fee were required to provide evidence of the exact costs, such as an invoice or bill. Eligibility for the relief only applied to individuals who had no other choice but to work from home. For instance, where the business did not have an office or the daily commute was not feasible. Individuals who simply preferred to work from home did not qualify. Is there any relief still available for home workers? The only remaining tax-free support will be reimbursements made directly by employers. This applies only where the payments relate to demonstrated additional household costs and where the costs are incurred wholly, exclusively and necessarily for employment duties. For anyone still claiming work-from-home relief, it is worth reviewing your position now to understand how this abolishment will impact your take-home pay.