Major UK Tax Reform Takes Effect Next Week, Bringing Higher Costs for Businesses and Investors

Starting April 2025, the United Kingdom will roll out one of its most sweeping tax reforms in recent years, impacting businesses, property owners, and high-net-worth individuals. These changes, introduced in the Autumn Budget 2024 and set to take effect in the new financial year, aim to raise revenue while addressing perceived loopholes in the existing tax system.

Here’s a breakdown of what’s changing—and who it affects.

Business Owners: Higher Costs and Reduced Relief

NICs Increase

One of the most immediate impacts will be on employers. The Employer National Insurance Contributions (NICs) rate is set to rise from 13.8% to 15%, while the threshold for paying NICs will be cut from £9,100 to £5,000.

To soften the blow for smaller businesses, the Employment Allowance will increase from £5,000 to £10,500, potentially helping companies with lower payrolls manage the transition.

Capital Gains Tax (CGT) Hike

From April 2025, Capital Gains Tax rates will increase:

• For basic-rate taxpayers: From 10% to 18%
• For higher-rate taxpayers: From 20% to 24%

Business Asset Disposal Relief (BADR) and Investors’ Relief will also see rate increases, with BADR moving to 14% in April 2025 and eventually 18% by April 2026.

Carried Interest Gains

For private equity professionals, carried interest gains will be taxed at a higher rate of 32% from April 2025. Beginning in 2026, these gains will be treated as income, making them subject to both income tax and National Insurance contributions.

Property Owners and Landlords: Reduced Tax Breaks

Stamp Duty Land Tax (SDLT) Increase

If you’re planning to buy a second home or an investment property, prepare for a higher tax bill. The surcharge for additional dwellings will increase from 3% to 5%, starting 31 October 2024.

Furnished Holiday Lettings (FHL) Scrapped

From April 2025, the Furnished Holiday Lettings regime will be abolished. These properties will now be taxed under standard property business rules, meaning owners lose access to special CGT and capital allowance benefits.

This change is expected to deter short-term letting businesses and could increase supply in the long-term rental market.

Vehicle Tax Reclassification

In another niche but impactful move, double cab pickup vehicles with a payload of one tonne or more will now be classified as cars for tax purposes. This will affect how these vehicles are treated for capital allowances and benefit-in-kind calculations.

Expats and High-Net-Worth Individuals: End of the Non-Dom Regime

Perhaps the most controversial change is the abolition of the “non-domiciled” (non-dom) tax status.

From April 2025:

• The remittance basis will be scrapped.
• A new system will grant 100% relief on foreign income and gains for the first four years of UK residency—provided the individual has not been a UK tax resident in the previous 10 years.

Inheritance Tax Changes

Non-UK assets will become liable for Inheritance Tax (IHT) if the individual has been a UK resident for at least 10 out of the last 20 years.

The nil-rate band for IHT will remain frozen until 2030, potentially drawing more estates into the tax bracket due to inflation.

Economic Impact and Reactions

The government expects the reforms to increase tax revenue and restore fairness to the system. However, there are already signs of stress in the economy. In March 2025, the number of payrolled workers dropped by 78,000, indicating potential employer hesitation tied to the upcoming NIC hikes.

🔗 The Guardian: Drop in Payrolled Workers

Some business owners have expressed frustration, suggesting that these new taxes could lead to reduced hiring or layoffs.

What You Should Do Now

• Employers should reassess their payroll costs and consider how the NIC increase and changes to capital allowances will affect hiring.
• Landlords and property investors may want to finalize purchases or sales before SDLT changes take effect in October 2024.
• Non-doms and international investors should seek expert tax advice immediately to restructure holdings ahead of April 2025.

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