Changes to Employee Benefits and Key Regulations for Businesses and Individuals in 2025/26
- TBA
- 5 days ago
- 4 min read
Updated: 16 minutes ago
From 6 April, the UK entered a new tax year, and with it came a series of new regulations. Have you already noticed changes in your household bills or tax liabilities? For many business owners, the effects may become more apparent by the end of the month.
Whether you're self-employed or run a limited company, the 2025/26 tax year brings several important changes—impacting Employer National Insurance Contributions (NICs), minimum wage rates, company size thresholds, and Capital Gains Tax (CGT), among others.
If you're a business owner or have registered a UK limited company, the following policy updates are crucial to understand.
If you’re an employee or about to enter the workforce, some of the benefits you may be entitled to are also changing.
Employer National Insurance Contributions
In the 2025/26 tax year, significant changes will directly impact employers—most notably regarding Class 1 Secondary NICs.
Effective from 06 April 2025:
The employer rate for Class 1 Secondary NICs (on employees' wages) will rise from 13.8% to 15%.
The NIC threshold will decrease from £9,100 to £5,000, meaning employers will pay NICs for more of their employees' earnings.
NICs on employee expenses and benefits (Class 1A and Class 1B) will also increase from 13.8% to 15%.
Despite the rise in tax burden, the government has introduced measures to support small and medium enterprises (SMEs):
Employment Allowance will increase by 110%, from £5,000 to £10,500 per year.
The £100,000 eligibility threshold for this allowance will be abolished, enabling more businesses to benefit.
NIC Lower Earnings & Small Profits Thresholds
The Lower Earnings Limit (LEL) and Small Profits Threshold (SPT) are key in determining whether employees or self-employed individuals qualify for National Insurance records (e.g. to claim the State Pension).
From 6 April 2025, the following changes will apply:
LEL (employees): increases from £6,396 to £6,500 per year.
SPT (self-employed): increases from £6,725 to £6,845 per year.
Only individuals earning above these thresholds will be treated as having paid NICs, thus accumulating qualifying years for benefits like the State Pension.
Note: Actual NIC payments are only required if annual earnings exceed the personal allowance of £12,570. Below this, voluntary contributions can be made.
Minimum Wage Increases
From 01 April 2025, the National Living Wage and National Minimum Wage will be updated as follows:
21 and over (National Living Wage): £12.21/hour
Ages 18–20: £10.00/hour
Ages 16–17: £7.55/hour
Apprentices: £7.55/hour
Accommodation Offset: £10.66/night
Statutory Employee Benefits Increase
From 6 April 2025, statutory employee benefit payments will increase:
Statutory Sick Pay (SSP): £118.75 per week
Statutory pay for maternity, paternity, adoption, shared parental, and parental bereavement leave: £187.18 per week
Maternity Allowance: £187.18 per week
Also from this date, eligible employees will gain the ‘day one right’ to Statutory Neonatal Care Leave and Pay, if caring for a baby in neonatal intensive care. Pay is set at £187.18 per week.
Small Employers’ Relief Increase
From 6 April 2025, the Small Employers’ Relief reimbursement rate will increase from 103% to 108.5%.
This allows qualifying small businesses to:
Reclaim 100% of statutory payments (maternity, paternity, adoption, parental bereavement, shared parental, neonatal),
Plus an additional 8.5%, to help cover indirect costs of processing these payments.
Larger employers may still reclaim 92% under existing rules.
State Pension Annual Increase
Under the Triple Lock Guarantee, pensions will rise by 4.1% in the 2025/26 tax year:
New State Pension (for those reaching retirement age on/after April 2016): rises from £221.20 to £230.25/week, or about £470 annually.
Basic State Pension (before April 2016): rises from £169.50 to £176.45/week, or about £361 annually.
Company Size Classification Thresholds
As part of the 2024 Companies (Accounts and Reports) Regulations, the UK will adjust turnover thresholds for company size classifications from 6 April 2025.
The new thresholds affect:
Micro-entities
Small companies
Medium-sized companies
Large companies’ thresholds and employee headcount rules remain unchanged.
The new limits, applicable to financial years starting on or after 6 April 2025, will allow more Limited Companies and LLPs to qualify as Micro or Small entities—benefiting from simplified financial reporting obligations.
In addition, certain disclosure requirements in directors’ reports for medium and large companies will be removed to reduce administrative burdens.
Capital Gains Tax (CGT) Changes
From 6 April 2025, the preferential CGT rate for:
Business Asset Disposal Relief (BADR) and
Investors’ Relief (formerly Entrepreneurs’ Relief)
...will increase from 10% to 14%.
This applies to qualifying disposals made on or after this date, affecting business owners or investors planning to sell shares or assets.
The CGT rate is scheduled to rise again in April 2026, from 14% to 18%, aligning it with the general lower CGT rate bracket and tightening tax treatment of asset disposals.
Retail, Hospitality & Leisure Business Rates Relief Extended
The UK Government has extended the Retail, Hospitality and Leisure (RHL) business rates relief for another year. However, the relief will reduce from 75% to 40%, with a maximum cap of £110,000 per business.
Additionally:
Standard multiplier will increase from 54.6p to 55.5p
Small business multiplier remains frozen at 49.9p
Furnished Holiday Lettings Tax Regime to Be Abolished
From 6 April 2025, the Furnished Holiday Lettings (FHL) tax regime will be abolished.
This means the current tax advantages and separate reporting requirements for FHL properties will end. Income and gains from such properties will now be taxed as part of the taxpayer’s UK or overseas property business under standard rules, as with unfurnished or non-FHL lets.
HMRC Late Payment Interest Rate Increase
According to the Autumn Budget 2024, from 06 April 2025, HMRC will increase the interest rate on late tax payments by 1.5 percentage points, setting it at Bank of England base rate + 4%.
This change will significantly raise the cost of delayed payments. Taxpayers are strongly advised to meet filing and payment deadlines to avoid additional interest and penalties.
If you need professional advice or want to understand how these changes affect your business or personal finances, contact TB Accountants for more advice.
