New Tax Year 2025: Key Dates & Changes
The new tax year brings updates to small businesses. Learn the main changes to plan ahead and stay compliant.
Published Tuesday 20 May 2025
When does the new tax year start?
If you’re wondering “When did the new tax year start?”, the UK’s new tax year officially began on 6 April 2025.
This date brings updated tax rates and thresholds, new PAYE reporting requirements, and key deadlines for businesses and individuals. It is important to stay on top of the new regulations, update your systems, and review financial records to ensure everything is accurate and up to date.
Key tax deadlines for businesses in 2025/26
The UK tax year 2025/26 sees a number of key deadlines for business owners to keep in mind.
Self-assessment tax return deadlines
Individuals such as sole traders and business partners need to report and pay their income tax via self-assessment. Critical deadlines for the 2025/26 tax year are:
- 5 October 2025: Last day to register for self-assessment if you're filing for the first time.
- 31 October 2025: Deadline to submit a paper tax return.
- 31 January 2026: Deadline to file an online tax return and pay any tax owed.
Make sure to file on time – missing a deadline will incur a minimum £100 fine, plus interest on any unpaid tax.
VAT deadlines
Most VAT-registered businesses file their VAT return and pay VAT owed every quarter. The deadline is one month and seven days after the end of each VAT period.
For example, your VAT period ends 31 March 2025. You’d need to file and pay by 7 May 2025.
When registering for VAT, you can choose your VAT accounting period – it doesn’t need to align with the financial year. Businesses can also apply to file monthly or annually if it better suits their cash flow or operations, subject to HMRC approval.
PAYE deadlines
If you run payroll, you must send a Full Payment Submission (FPS) to HMRC on or before each payday. PAYE payments are then due by the 22nd of the following tax month if paying electronically.
For instance, if the tax month ends 5 May 2025, payments are due by 22 May 2025.
Navigating the 2025/26 tax year: key changes for businesses
2025/26 tax year changes can catch you off guard if you aren’t careful, affecting your business’s cash flow and day-to-day operations.
Making Tax Digital (MTD) for income tax
From April 2026, sole traders and self-employed individuals with an annual income over £50,000 must join Making Tax Digital for income tax, submitting digital records to HMRC each quarter. The income threshold drops to £30,000 for 2027 and £20,000 for 2028.
While it’s not mandatory in 2025, you can choose to sign up early to get familiar with the system.
To prepare for MTD, businesses should:
- Start using compatible accounting software
- Keep their financial records digital and up to date
- Get advice if they’re unsure what’s required
Xero can help make the move to MTD simple, supporting digital record-keeping, reducing admin, and allowing quarterly submissions to HMRC. Learn more about MTD with Xero.
National Insurance updates: what businesses need to know
Changes to National Insurance affects employers, employees, and the self-employed. Stay on top of the changes, as they impact payroll costs, cash flow, and financial planning for the year ahead.
Here is a summary of the main changes that came into effect on April 6 2025.
Increase to employer’s National Insurance
Employers’ NIC increased from 13.8% to 15%, and the secondary threshold has dropped from £9,100 to £5,000.
Smaller businesses should consider the cash flow impact of higher NIC bills.
Changes to earning thresholds
For employees, the Lower Earnings Limit (LEL) increased to £6,500, which qualifies you for benefits like the State Pension.
For the self-employed, the Small Profit Threshold (SPT) was raised to £6,845 – Class 2 NICs apply to income above this.
Class 2 and 3 NIC rate increase
Class 2 NICs, paid by self-employed individuals, were raised to £3.50 per week – these contributions count towards benefits like the State Pension.
Class 3 NICs, which are voluntary and used to fill gaps in your National Insurance record, increased to £17.75 per week.
Enhanced employment allowance to support small businesses
The Employment Allowance – which helps small businesses reduce their NIC bill – increased from £5,000 to £10,500. The £100,000 earnings cap was also removed, meaning more businesses will now qualify for support.
This change could significantly reduce NIC costs for eligible employers.
Payroll and statutory pay adjustments
April 2025 brings increases to the minimum wage and statutory pay rates.
These changes will raise payroll costs, so it’s important to check that your budgets are still accurate and that your business stays compliant with current legislation.
Minimum wage and living wage increases
The National Living Wage increased to £12.21 per hour for those aged 21 and over. For workers aged 18-20, the rate rises to £10 per hour, while under-18s and apprentices will receive a minimum of £7.55 per hour.
Statutory pay increases
Statutory Maternity Pay (SMP) and Statutory Paternity Pay (SPP) increases to £187.18 per week. Statutory Sick Pay (SSP) is raised to £118.75 per week.
Student loan threshold changes
The thresholds for Plan 1, Plan 2, and Plan 4 student loans are increasing, so ensure your payroll systems are updated with the latest figures. The Plan 3 (postgraduate) threshold will remain at £21,000. Student loans are repaid at a rate of 9% on earnings above the threshold, and 6% for postgraduate loans.
Capital Gains Tax (CGT) increases for businesses
Formerly known as Entrepreneurs’ Relief, Business Asset Disposal Relief (BADR) lets business owners pay a reduced CGT rate when selling all or part of their business. To qualify, you must be actively involved in the day-to-day running of the business.
If you're not involved in daily operations, you may still benefit from a CGT reduction through Investors’ Relief. This applies only to unlisted companies, and you must have held the shares for at least three years.
CGT rates for both BADR and Investors’ Relief are increasing from 10% to 14% in 2025, then to 18% in 2026. The lifetime limit for Investors’ Relief will be reduced from £10 million to £1 million in 2025.
If you're considering a business sale, it’s worth reviewing your plans before the higher rates come into play.
Apprenticeship levy replacement
From April 2025, the Apprenticeship Levy will be replaced by the Growth and Skills Levy.
The new levy is broader and more streamlined allowing small businesses to invest in a wider range of workforce training – not just apprenticeships – before their funding expires after 24 months.
The contribution rate remains the same, with employers with a payroll over £3 million needing to contribute 0.5% of their annual payroll costs.
To make the most of the new levy, review your training and development needs, then speak with training providers to explore eligible programmes.
Retail, hospitality & leisure (RHL) scheme
The Retail, Hospitality and Leisure Scheme (RHL) provides business rates relief for eligible properties in these sectors. It has been extended into the 2025/26 tax year, offering 40% relief, capped at £110,000 per business.
The small business multiplier will remain at 49.9p, while the standard multiplier is increasing to 55.5p. This helps ease cost pressures on smaller businesses in these sectors during a time of rising operating costs.
It’s worth checking if you’re eligible, as any savings could help strengthen your cash flow position or free up room in your budget.
How to prepare your business for the new tax year
Put your business in the best position to make the most of the 2025/26 tax year ahead.
Review financial records
Review your financial records to close out the 2024/25 tax year based on the outgoing tax rules. This ensures your year-end is accurate and gives you a clean slate for the new 2025/26 tax year.
Check that your financial statements are complete, transactions are reconciled, and there are no discrepancies. A thorough review helps you catch missed income, unclaimed expenses, or duplicate entries – this avoids either overpaying tax or underpaying, which risks penalties.
By closing out the year correctly, you’ll avoid carrying over errors into the new tax year, which comes with updated rates, thresholds, and obligations.
Use accounting software
Managing tax obligations manually is time-consuming and, with deadlines looming, can easily lead to errors.
Accounting software helps streamline the whole process, automating tax tracking, generating accurate financial reports, and reducing errors – all while ensuring compliance with HMRC requirements.
Xero is built to support small businesses through the UK new tax year and beyond, so you can spend less time worrying about last-minute tax calculations and more time growing your business.
Seek professional advice
A professional accountant or bookkeeper can help you stay compliant and avoid paying more tax than necessary in the 2025 tax year.
They can make sure you’re claiming all allowable expenses, identifying tax-saving opportunities, and avoiding costly mistakes. If your business operates in a niche sector, it’s especially important to choose someone with experience in your industry.
Avoid common tax mistakes in the 2025/26 tax year
Avoiding a few key pitfalls can help your business stay compliant and minimise unnecessary tax costs.
What happens if I miss a tax deadline?
If you miss a tax deadline, HMRC can charge you penalties and interest.
- Late filing: You’ll get an automatic £100 fine if your tax return is even one day late. This can increase the longer you delay.
- Late payment: If you don’t pay your tax on time, interest starts building up right away. You could also face extra penalties after 30, 60, and 90 days.
If you realize you’ve missed a deadline, act quickly. File or pay as soon as possible to limit extra charges. If you have a valid reason – like illness or a technical issue – you may be able to appeal the penalty. You can also speak to HMRC about setting up a payment plan if you’re struggling to pay.
Be sure to keep accurate financial records
Keeping accurate, up-to-date financial records makes life much easier at year-end – and helps you avoid tax issues that can lead to penalties.
Track all income and expenses, keep receipts, and stay on top of your records to simplify the filing process and stay compliant with HMRC. Accounting software like Xero makes it much easier to keep your transactions reconciled and organised throughout the year.
Take advantage of tax deductions and allowances
Overlooking tax deductions and allowances means missing out on valuable savings your business is entitled to.
Keep track of all eligible expenses and make sure you’re making use of available tax reliefs to reduce your overall tax bill.
Stay ahead of the new tax year with Xero
Preparing for tax year 2025 starts with the right tools.
Xero helps you stay on top of your tax obligations with features like automated bank reconciliation, VAT tracking, and tax forecasting – so you can focus on running your business, not time-consuming admin.
Start using Xero for free
Access Xero features for 30 days, then decide which plan best suits your business.
Disclaimer
Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the content provided.