New tax year, new rules: what’s changing for businesses and landlords in 2025/26?

Just like a high-speed drive, the year has raced by and brought us suddenly to a new tax year. And because every government loves to keep you on your toes, there’s a selection of new rules and changed rates that may well affect your business or properties. 

We’re here to help, signposting the updates you need to know this April, while pressing on with your day-to-day work.

The headlines

Changes to employers’ National Insurance mean employers will pay the increased rate on more earnings - but deduct more from their bill.

Late tax payment interest rate rises aimed to discourage late payments to HMRC.  

Furnished Holiday Lets no longer exist as a separate category of property rentals with separate tax rules.

What’s changing from 1st April 2025?

Wages increase

• The National Living Wage for adults aged 21 and over increases to £12.21 an hour.
• The National Minimum Wage for 18 to 20-year-olds increases to £10 an hour. 
• The minimum wage for under 18s and apprentices increases to £7.55 an hour. 

Retail and hospitality rates relief reduces

• The business rates relief for retail, hospitality and leisure (RHL) properties in England will be reduced to 40%.
• The value of RHL business rates relief cannot exceed £110,000 per business.

What’s changing from 6th April 2025?

National Insurance contributions for employers change

• Employers’ National Insurance must be paid at an increased rate of 15% on all workers’ earnings over £5,000.
• Employers can deduct an increased value of £10,500 from their employers’ National Insurance bill thanks to the Employment Allowance - unless one of the exceptions applies, for instance, the employer is a limited company where the director is the only employee. 
• There is no longer a cap of £100,000 in the previous year’s employers’ NI bill for eligibility. 

Capital Gains Tax rates increase 

• The lower rate of Capital Gains Tax (for businesses or individuals which qualify for Business Asset Disposal Relief or Investors Relief) increases to 14%.
• The Capital Gains Tax rate for carried interest (a performance-related reward received by fund managers) increases to 32%. 

Penalties for late Making Tax Digital payments increase

• The penalty currently charged by HMRC for Making Tax Digital for VAT payments (and soon-to-be charged for Making Tax Digital for Income Tax payments) that are at least 15 days late will now be 3% of the amount outstanding.
• The penalty for payments that are at least 30 days late will be 3% of the amount outstanding at day 15 plus 3% of the amount outstanding at day 30. 
• There is also a penalty of 10% of the amount outstanding added per annum. 

Late payments interest rate increases

• In addition to penalty increases for MTD users, all taxpayers will face interest rate increases on late payments to HMRC. Interest rates will go up to the Bank of England base rate plus 4% - which will be 8.5%.

Company size thresholds increase

• The monetary size thresholds for financial reporting for companies are increasing, meaning that over 100,000 UK companies are likely to move to a lower size category with reduced reporting and audit requirements. The table below shows the new categories from 6th April 2025.

Furnished holiday lets no longer treated differently to long-term lets

The separate tax status of Furnished Holiday Lets is ending, meaning that landlords:

• won’t be eligible for any Capital Gains Tax relief
• won’t be able to claim capital allowances for items like furniture or white goods
• won’t receive tax relief on any rental income they pay into a pension scheme
• may not claim allowable expenses for their FHL’s heating and electricity bills, full finance costs, cleaning costs and more
• may need to pay Council Tax rather than business rates

What else do you need to prepare for during the 2025/26 tax year?

Small business rates multipliers frozen until 2026

The small business multiplier - how business rates are calculated for RHL properties with a rateable value below £51,000 - remains frozen at 49.9p for 2025/26. There could be considerable changes to RHL business rates in 2026/27, as the government has pledged to “level the playing field between the high street and online giants”. Watch this space!

Making Tax Digital for Income Tax is coming… 

Making Tax Digital for Income Tax (MTD IT) will require businesses and landlords to maintain digital records and report earnings to HMRC each quarter.

From April 2026, self-employed individuals and landlords with qualifying incomes over £50,000 will need to submit tax returns digitally using MTD-compatible software like FreeAgent. 

MTD IT will be rolled out to include all those with qualifying incomes over £30,000 by April 2027 and £20,000 by April 2028. We’ll keep you updated on your potentially changing responsibilities. 

Fuel duty stays frozen

Fuel duty will be frozen until March 2026, extending the 5p cut.

Last year of the Growth Guarantee Scheme

The Growth Guarantee Scheme (formerly the Recovery Loan Scheme) is an initiative to help businesses secure loans using government guarantees of up to 70%. This has been extended for several years but is due to end in March 2026. 

Government late payment rules get a little stricter

From October 2025, firms bidding for government contracts worth more than £5 million must demonstrate that they pay their invoices within an average of 45 days. (More info here.)

No change to personal tax rates

Rates of Income Tax, VAT and National Insurance paid by individuals and employees are to remain the same in 2025/26. Similarly, the freeze on Income Tax thresholds (which can mean people are pulled into paying higher rates due to inflation) has been extended - the Chancellor has announced this freeze will end in 2028. 

The new tax year = the best time to start new accounting software

If you’re looking for better ways to track your business finances in the new tax year, FreeAgent can help. Switching over at the new tax year means there’s less data to bring over - and you’ll be one step ahead of your MTD IT responsibilities. Try FreeAgent now with your first 30 days free.