There has been much talk of ‘doom and gloom’ in the small business world, particularly around changes coming into force during April 2025.
Many of these changes were a result of the ‘Black Hole Autumn Budget’ announcements at the back end of 2024. However, it’s not all bad news. Here is our reminder of the key changes, and what you can do to reduce the impact on your business.
Employers’ National Insurance changes
From 6th April 2025, business owners saw their employer’s National Insurance bill increased by 1.25%, from 13.8% to 15%.
This is National Insurance (NI) that the business pays on a team member, above what that employee pays. So it’s an additional cost on top of the wage bill, much like employers’ pension contributions.
It all adds up too – the government estimates these changes will eventually raise a whopping £25bn a year.
The ‘double-whammy’ of this increase is that the threshold at which NI needs starts to be paid is being lowered, from £9,100 to just £5,000 per year.
To offset this, the Employment Allowance for qualifying small businesses is being raised from £5,000 to £10,500. This allowance allows you to reduce your employers NI bill if you qualify.
For directors of limited companies taking a tax efficient small salary, this will likely result in you now paying some employer’s National Insurance. If eligible, the Employment Allowance can cover some or all of this.
Minimum wage hikes
There were also some significant changes to the minimum wage on 1st April 2025:
- Under 18s and apprentices: £7.55 per hour (+18%)
- 18 – 20: £10.00 per hour (+16.3%)
- 21+: £12.21 per hour (+6.7%)
The additional impact here depends how small businesses react to those on hourly rates above the minimum. With the gap vastly reduced, this could cause pay scale challenges, which in turn may require a rise to maintain fairness in pay vs responsibility.
When you factor in the increase in Employment Allowance, it is a significant extra cost for most small businesses.
As a side note, there are some rare scenarios where if you have a small team paid well above minimum wages, the new changes can result in a small saving. So it’s not all bad news!
Business rates
If you are in the retail, hospitality and leisure industries you will likely have seen an increase in your business rates. This is due to a cut in an existing relief the government had in place until recently. On top of the additional NI to pay, this is another squeeze these sectors will have to budget for.
No more monster truck tax break
If you are looking to buy a crew cab (‘double cab’) pick up from April 2025, these are no longer taxed as a van. The tax consequences are so bad that you may now consider not buying them at all if you are a limited company.
These types of vehicles will be effectively taxed as cars. So if they available to you to use privately (for example, it’s parked on your drive), it becomes a ‘benefit’ and you will incur a large tax bill each year for that.
The upfront tax relief is also changing for the worse. Previously, the vehicle purchase cost was claimable in the first year to offset against your profits and reduce your tax bill. From April 2025, in most scenarios this will be now spread (very slowly) over multiple years.
If you already have such a truck in the business, you are ok until your lease expires, or April 2029, whichever is sooner.
Tax on the big stuff is going up
In the Autumn Budget of 2024 it was announced that Capital Gains Tax (CGT) rates would rise. As a reminder Capital Gains Tax is the tax you pay when you sell (or ‘dispose’ in some other way) items such as rental property, shares or crypto.
The rate you pay is based on the profit made on the disposal of the item and your other income in the tax year. (It’s a complex calculation.)
AND
The rate of tax you pay on these items is less than income tax rates for other types of earnings (such as your day job, self-employed earnings, etc).
The changes mean that the CGT rates applicable to most items (other than residential property) increase in April 2025 from 10% or 20% to 18% or 24%. This brings them in line with the same rates you now pay on residential property you dispose of.
Selling your business
For owners selling their business, a popular tax relief was ‘Business Asset Disposal Relief’ (previously known as Entrepreneurs’ Relief). This had a very attractive tax rate at 10% on the first £1million profit. This has now changed to 14%, and rising again from April 2026 to 18%. Still good, but not great!
Overall, if you are looking to sell off your business, there may may still be actions you can take to mitigate tax, so it’s worth checking with a professional.
The growing cost of ‘people’
Your suppliers may have already raised their prices in response to these changes. The majority of price hikes will be caused by the rising cost of ‘people’ in a business. This is a BIG challenge, because if you do nothing to mitigate the extra costs, it’s very likely your business will be making less money (or worse case, losing money). This will be unavoidable regardless of your situation.
Some good news?
If no news is good news, then if you are self-employed, you can relax a little. Not much is actually changing for you in terms of tax changes, if you don’t employ a team.
The same applies to limited companies owners without a team. Things for you are also fairly ‘stable’ in the tax world, outside the changes outlined above.
Action plan for dealing with the changes
There are a few key practical tasks to look at to combat these challenges:
Assess your own ‘model’
You can read our thoughts on how to do this in our blog on Monitoring the Model during tough times.
Review your own pricing
No owner likes this task, and they all worry about loss of customers or clients. However, raising prices is certainly a strategy you will need to consider. In the small business world, slow reaction to costs pressures is a key reason for lack of business profits (and business failures).
You can read our thoughts on how to manage this process in our blog on Pricing Under Pressure.
April changes and your team
If you have a team, look at the impact of the tax changes. Grab a spreadsheet and work it out, or speak to a professional for help calculating this.
Selling your business in 2025?
If you are considering selling your business, consider doing so this tax year to keep the tax bill as low as possible. You will likely need professional support to structure the deal in a way that achieves this. Discuss this early in the process with an adviser.
Want to keep your monster truck?
If you have a double cab pickup in the business and intend to hold it past 2029, consider the impact. Do some research, speak to an advisor and work out if it’s worth keeping in the business, particularly if you are a limited company.
Confused by all the changes?
We’re not surprised – there’s quite a lot to take in. If you are having problems understanding the impact on your particular business, first ask your accountant. If you’re not getting satisfactory answers from your current accountant, or don’t have an accountant at all, just get in touch.