Tax Year 2025/26: Key dates, rates and business changes

Published Monday 22 December 2025

Table of contents

• When does the new tax year start?
• Income tax rates and personal allowances 2025/26
• Key tax deadlines for businesses in 2025/26
• National Insurance updates: what businesses need to know
• Navigating the 2025/26 tax year: key changes for businesses
• How to prepare your business for the new tax year
• Avoid common tax mistakes in the 2025/26 tax year
• Stay ahead of the new tax year with Xero
• FAQs on tax year 2025/26

Key takeaways

• The UK tax year 2025/26 runs from 6 April 2025 to 5 April 2026. Key changes include updates to National Insurance contributions, statutory pay rates, and the extension of the Retail, Hospitality & Leisure (RHL) business rates relief scheme.
• Update your payroll systems to account for the increased employer National Insurance rate from 13.8% to 15% and the reduced secondary threshold from £9,100 to £5,000, as these changes will significantly impact your cash flow and payroll costs from 6 April 2025.
• Prepare for Making Tax Digital requirements by implementing compatible accounting software now, even though MTD for income tax isn't mandatory until April 2026 for businesses with income over £50,000, to familiarize yourself with digital record-keeping and quarterly submissions.
• Mark critical tax deadlines in your calendar, including self-assessment registration by 5 October 2025 for first-time filers and online filing by 31 January 2026, to avoid automatic £100 penalties and interest charges on late submissions.
• Review your business for eligibility for the enhanced Employment Allowance (increased from £5,000 to £10,500) and the extended Retail, Hospitality & Leisure business rates relief (40% relief capped at £110,000), as these could provide significant cost savings for qualifying businesses.

When does the new tax year start?

The UK tax year 2025/26 starts on 6 April 2025 and ends on 5 April 2026. This new tax year introduces:

• Updated National Insurance rates and thresholds
• New income tax personal allowances
• Enhanced Making Tax Digital requirements
• Key compliance deadlines for businesses

Stay compliant by updating your systems and reviewing financial records before key deadlines.

Income tax rates and personal allowances 2025/26

Understanding the latest income tax rates and personal allowances is essential for managing your finances and ensuring you pay the right amount of tax. For the 2025/26 tax year, the standard personal allowance remains at £12,570. This is the amount of income you can earn before you start paying income tax.

Tax rates and bands for England, Wales, and Northern Ireland

The income tax rates are set by the UK government for England, Wales, and Northern Ireland. The bands for 2025/26 are:

• Basic rate: 20% on income from £12,571 to £50,270
• Higher rate: 40% on income from £50,271 to £125,140
• Additional rate: 45% on income over £125,140

Tax rates and bands for Scotland

Scotland has its own income tax rates and bands, which differ from the rest of the UK. The bands for 2025/26 are:

• Starter rate: 19% on income from £12,571 to £14,876
• Basic rate: 20% on income from £14,877 to £26,561
• Intermediate rate: 21% on income from £26,562 to £43,662
• Higher rate: 45% on income from £43,663 to £75,000
• Advanced rate: 48% on income from £75,001 to £125,140
• Top rate: 48% on income over £125,140

Your personal allowance may be lower if your income is over £100,000, a threshold which has not increased since 2010. It's important to check which rates apply to you based on where you live.

Key tax deadlines for businesses in 2025/26

Key tax deadlines help you avoid penalties and maintain compliance throughout the 2025/26 tax year. Missing these dates can result in automatic £100 fines plus interest charges.

Self-assessment tax return deadlines

Self-assessment is how sole traders and business partners report and pay income tax to HMRC. Meet these deadlines to avoid penalties:

• 5 October 2025:Register for self-assessment (first-time filers)
• 31 October 2025: Submit paper tax return
• 31 January 2026: File online return and pay tax owed

File on time so you avoid the minimum £100 penalty and interest on any unpaid tax.

VAT deadlines

VAT deadlines occur quarterly for most businesses. File and pay within one month and seven days after each VAT period ends.

Example: VAT period ends 31 March 2025 = deadline 7 May 2025.

The VAT accounting periods offer flexible options:

• Choose your VAT accounting period (doesn't need to match financial year)
• Apply for monthly or annual filing (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.

National Insurance updates: what businesses need to know

directly impact your payroll costs and employee contributions from 6 April 2025, with the Office for Budget Responsibility estimating the increase in employer NICs could reduce potential output by 0.1%. These updates affect cash flow planning and compliance requirements for all businesses with employees.

Main changes:

Increase to employer's National Insurance

Employer National Insurance rate: Increased from 13.8% to 15%

Secondary threshold: Reduced from £9,100 to £5,000

Impact: Higher payroll costs require updated cash flow planning

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.

Learn more about National Insurance contributions.

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 your NIC costs if you’re an eligible employer.

Find out how to claim Employment Allowance.

Navigating the 2025/26 tax year: key changes for businesses

Key tax year changes affect your payroll costs, compliance requirements, and business planning. Understanding these updates helps you budget accurately and avoid unexpected expenses.

Making Tax Digital (MTD) for income tax

From April 2026, around 780,000 self-employed individuals and landlords 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 Making Tax Digital (MTD), you should:

• Start using compatible accounting software
• Keep their financial records digital and up to date
• Get advice if they're unsure what's required

Learn more about MTD with Xero.

Payroll and statutory pay adjustments

From April 2025, the minimum wage and statutory pay rates increase.

These changes will raise payroll costs, so 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.

View the latest minimum wage rates.

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.

Learn more about BADR.

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.

Effective 6 April 2025, CGT rates for both BADR and Investors' Relief are increasing from 10% to 14%, and will rise again 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, review your plans before the higher rates come into effect.

Apprenticeship levy replacement

From April 2025, the Apprenticeship Levy will be replaced by the Growth and Skills Levy.

The new levy is broader and simpler. It lets small businesses invest in a wider range of workforce training, rather than 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, a rate confirmed by the government to be charged at 0.5% for the 2025-26 tax year.

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 (RHL) business rates relief scheme 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 relief aims to ease cost pressures on smaller businesses in these sectors while operating costs are rising.

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.

See if you're eligible.

How to prepare your business for the new tax year

Preparing for the new tax year ensures compliance, avoids penalties, and helps you take advantage of available reliefs and allowances.

Review financial records

Financial record review ensures accurate year-end closure and compliance with both old and new tax rules.

Key actions:

• Complete financial statements: Ensure all transactions are recorded
• Reconcile accounts: Check for discrepancies or missing entries
• Identify missed items: Find unclaimed expenses or unreported income
• Avoid penalties: Prevent overpaying or underpaying tax

Learn how to do bank reconciliation.

When you close out the year correctly, you avoid carrying errors into the new tax year. The new year comes with updated rates, thresholds and obligations.

Use accounting software

Accounting software automates tax calculations, reduces manual errors, and ensures HMRC compliance throughout the tax year. For example, after MTD for VAT was introduced, a government report found 67% of businesses said the system reduced the potential for mistakes in their record keeping.

Key benefits:

• Automated tax tracking: Real-time calculations and reporting
• Accurate reports: Generate compliant financial statements
• Error reduction: Eliminate manual calculation mistakes
• HMRC compliance: Built-in regulatory requirements

Seek professional advice

A professional accountant or bookkeeper can help you stay compliant and avoid paying more tax than necessary in the 2025/26 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.

Learn how to choose an accountant.

Avoid common tax mistakes in the 2025/26 tax year

Common tax mistakes can result in penalties, interest charges, and compliance issues. Understanding these pitfalls helps you maintain accurate records and avoid unnecessary 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 realise 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 up to date 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 use available tax reliefs to reduce your overall tax bill.

Stay ahead of the new tax year with Xero

Preparing for the 2025/26 tax year 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. That means you can focus on running your business, not admin.

Try Xero for free to get started.

FAQs on tax year 2025/26

Here are answers to some common questions you might have about the 2025/26 tax year.

What is the tax year for 2025 to 2026?

The UK tax year runs from 6 April 2025 to 5 April 2026. This is the period that your income tax and National Insurance contributions are calculated for.

Which tax year is due in 2025?

The tax return you file and pay by 31 January 2025 covers the 2023/24 tax year, which ended on 5 April 2024. The deadline to register for self-assessment for the 2025/26 tax year is 5 October 2025.

Do I need to register for Making Tax Digital now?

Making Tax Digital (MTD) for income tax is not yet mandatory. It will be introduced from April 2026 for self-employed individuals and landlords with an annual income over £50,000. You can choose to sign up voluntarily before then to get used to the system.

What's the difference between tax year and financial year?

The tax year, which runs from 6 April to 5 April, is for personal and income tax. The financial year, which runs from 1 April to 31 March, is used for corporation tax and government accounting. Your business's accounting period can be different from both, but it often aligns with the financial year.