Debonair Management Services Limited

Budget 2025

November 27, 2025November 27, 2025 Debonair Management Services Limted

INCOME TAX AND NATIONAL INSURANCE

Income tax threshold freeze: The silent tax rise

The most significant revenue-raiser continues to be fiscal drag. The personal allowance (£12,570) and higher rate threshold (£50,270) will now remain frozen until 2030/31 – three additional years beyond the previous 2028 deadline. This measure alone will raise £7.6 billion annually by 2029/30.

National insurance contributions (No change)

Employer national insurance now sits at 15% on most earnings above £5,000 per employee, following changes that took effect from 6 April 2025. Employee rates remain at 8% on £12,570-£50,270 and 2% above. These changes have already raised payroll costs significantly, with no relief announced.

DIVIDEND, SAVINGS AND PROPERTY TAXATION

Dividend tax increases hit business owners

From 6 April 2026, dividend tax rates will increase by 2 percentage points across the board:

Basic rate: 8.75% becomes 10.75%
Higher rate: 33.75% becomes 35.75%
Additional rate: Remains at 39.35%

With the dividend allowance already slashed to just £500 annually, this creates a double burden for owner-managed businesses taking profits via dividends.

Abolition of dividend tax credit for non-UK residents

From 6 April 2026, the notional dividend tax credit previously available to non-UK residents on UK dividend income will be abolished. Non-residents will now be treated identically to UK residents for dividend tax purposes, subject to the same 10.75%/35.75%/39.35% rates.

New property income tax rates

From 6 April 2027, separate income tax rates for property will be introduced (England, Wales, and Northern Ireland):

Basic rate: 22% (vs 20% on other income)
Higher rate: 42% (vs 40%)
Additional rate: 47% (vs 45%)

The ordering of reliefs is also changing: from 6 April 2027, income tax reliefs and allowances will be applied first to non-property income, then property, followed by savings and dividends.

Savings income tax changes

From 6 April 2027, savings income tax rates will increase by 2 percentage points across all bands. The personal savings allowance (£1,000 for basic rate and £500 for higher rate taxpayers) will be maintained but no longer offset property or dividend income.

INHERITANCE TAX

Major changes to agricultural and business property relief

Effective from 6 April 2026:

Combined £1 million allowance at 100% relief for Agricultural Property Relief (APR) and Business Property Relief (BPR)
Assets exceeding £1m receive only 50% relief (effective 20% IHT rate)
AIM shares: 50% relief only, not covered by the £1m allowance
Payment: Can be spread over 10 years interest-free

The £1m combined allowance will be indexed to CPI from 6 April 2031, and all APR/BPR thresholds remain frozen until 30 April 2031.

Pensions brought into inheritance tax

From 6 April 2027, unused pension funds and death benefits will be brought into an individual’s estate for IHT purposes.

IHT thresholds frozen until 2030/31

The nil-rate band remains fixed at £325,000 and the residence nil-rate band at £175,000 until 2030/31, with the taper threshold fixed at £2 million. From 6 April 2031, these will increase in line with CPI.

CAPITAL ALLOWANCES

Writing down allowances: Main rate reduction

From April 2026, the main rate for Writing Down Allowances (WDA) on plant and machinery will be reduced from 18% to 14% on a reducing balance basis. The Special Rate Pool WDA (long-life assets and integral features) remains at 6%.

Introduction of a 40% first-year allowance

From January 2026, a new 40% first-year allowance is introduced for companies investing in qualifying plant and machinery in the main pool. Companies can deduct 40% of eligible costs in year one, with the remaining balance entering the main pool for WDAs at the new 14% rate.

Annual Investment Allowance (AIA) and full expensing

The £1 million AIA is retained, providing immediate 100% relief for qualifying expenditure up to this threshold each year. Full expensing also remains available:

100% first-year allowance on qualifying main pool plant and machinery (companies only)
50% first-year allowance on special rate pool assets

PROPERTY TAXES

The “Mansion Tax” on high-value properties

A new annual charge applies to residential properties valued over £2 million from April 2028:

£2m-£2.5m: £2,500 annually
£2.5m-£5m: Graduated up to £5,000
£5m+: Up to £7,500

Properties in council tax bands F, G, and H (approximately 2.4 million) will be revalued to determine liability. The charge can be deferred until sale or death.

SALARY SACRIFICE AND WORKPLACE BENEFITS

Salary sacrifice pension contributions capped

From April 2029, salary sacrifice pension contributions above £2,000 annually will be subject to both employer and employee National Insurance.

How it works:

First £2,000: NI-free as currently
Above £2,000: Subject to 8% employee NI (2% over UEL) and 15% employer NI

Expansion of workplace benefits relief

From 6 April 2026, employers can reimburse employees for eye tests, flu vaccines, and home working equipment with the same tax and National Insurance relief as if providing these items directly. Currently, exemptions only apply to direct provision, creating inconsistency.

Plug-in Hybrid Electric Vehicles (PHEV) benefits-in-kind easement

From 1 January 2025 to 5 April 2028 (retroactively), a temporary easement applies to mitigate PHEV benefit-in-kind tax liabilities due to new emission standards (EU Euro 6e and UN equivalents):

CO2 emission figure for qualifying PHEVs will be deemed to be nominal (value 1) rather than the actual figure on the registration document
Vehicles registered on/after 1 January 2025 with CO2 emissions ≥51 qualify

UMBRELLA COMPANIES AND CONTRACTOR COMPLIANCE

Umbrella company PAYE reforms – from 6 April 2026

Responsibility for PAYE compliance shifts from umbrella companies to either:

The recruitment agency (if one exists in the supply chain), or
The end client (if contracting directly with the umbrella company)

Joint and several liability applies. If the umbrella company fails to pay PAYE/NICs, HMRC can pursue the agency or end client for the full amount.

TAX COMPLIANCE AND ADMINISTRATION

Making Tax Digital soft landing period

The government has introduced legislation in Finance Bill 2025-26 in relation to Making Tax Digital (MTD) for Income Tax and the new penalty reform regime which means that taxpayers joining MTD in April 2026 will not receive penalty points for late submission of their first four quarterly updates.

Corporation tax late-filing penalties doubled

From 1 April 2026, penalties for submitting Corporation Tax returns late will double.

Current penalties for late CT submission are as follows:

Return late – £100 becoming £200
Return more than 3 months late – £200 becoming £400
Three successive failures, return late – £500 becoming £1,000
Three successive failures, return more than 3 months late – £1,000 becoming £2,000

Tax adviser registration to become mandatory

From May 2026, all tax advisers dealing with HMRC for clients must legally register with HMRC and meet minimum professional standards. This change, legislated in the 2025-26 Finance Bill, is designed to raise industry standards and enable HMRC to exclude non-compliant advisers.

Tax advisers will register digitally (with non-digital options for some) and must confirm compliance, including anti-money laundering requirements, each year. Overseas advisers will face slightly higher registration costs due to evidence and translation needs. Advisers who do not comply will be suspended from acting for clients until compliance is restored.

Enhanced HMRC powers: Tackling tax adviser-facilitated non-compliance

New powers enable HMRC to:

Request information from tax advisers where there is reasonable suspicion of deliberate non-compliance facilitation
Issue File Access Notices (FANs) without tribunal approval to expedite information requests
Impose penalties on advisers based on Potential Loss of Revenue (PLR) from deliberate conduct
Publish details of sanctioned advisers (with safeguards against exposing personal risk)

Tax advisers will face closer scrutiny. This creates operational risk for those inadvertently providing inaccurate advice. Targetting deliberate conduct, not one-off errors or genuine legal interpretation differences.

Tackling promoters of marketed tax avoidance

New measures strengthen the Disclosure of Tax Avoidance Schemes (DOTAS) regime through:

Universal Stop Notices (USNs): HMRC can stop promoters using certain channels or financial infrastructure
Promoter Action Notices (PANs): Restrict information sharing and supply chains
Connected Parties Information Notices (CPINs): Gather information on those linked to promoters
Promoter Financial Information Notices (PFINs): Access to promoter finances
Expanded scope: DOTAS now covers more schemes
Targeted criminal penalties: On legal professionals designing/contributing to avoidance schemes

Loan Charge settlement opportunity

The government has accepted recommendations from an independent review of the loan charge (which affects approximately 32,000 individuals who used disguised remuneration tax avoidance schemes). A new settlement opportunity, legislated in Finance Bill 2025-26, will substantially reduce outstanding liabilities. Most individuals could see at least 50% reductions, with an estimated 30% able to settle for nothing.

Key features include recalculating amounts based on tax rates when loans were made, applying promoter fee discounts (up to £10,000 per year), adding a flat £5,000 reduction, waiving late payment interest, writing off inheritance tax, and allowing five-year payment plans. The maximum reduction per person is capped at £70,000.

ENTERPRISE AND INVESTMENT RELIEF SCHEMES

Enterprise Management Incentive (EMI) scheme expanded

From 6 April 2026, the EMI scheme limits will expand to allow larger companies and scale-ups to participate. Key changes include increasing the company options limit from £3 million to £6 million, gross assets threshold from £30 million to £120 million, employee count from 250 to 500, and the exercise period from 10 to 15 years.

EIS/VCT Investment Limits Increased

Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) changes:

Company investment limit: Increased from £5m to £10m (£20m for Knowledge-Intensive Companies)
Lifetime company limit: Increased from £12m to £24m (£40m for KICs)
EIS annual investment limit: Remains £1m per investor (£2m if £1m+ in KICs)
VCT annual limit: Remains £200,000
VCT income tax relief: Reduced from 30% to 20% (but deferral relief improves)
Reinvestment relief: Extended to 5 April 2035

VAT MATTERS

VAT relief for business donations of goods to charities

VAT relief on donated goods is being extended from April 2026 to cover goods donated for charitable use (not just resale).

VAT treatment of Private Hire Vehicles (PHVs)

In response to a 2024 consultation, the government will not amend VAT legislation to allow PHV operators to act as agents for tax purposes in all cases, nor will it introduce a new margin scheme or reduced rate for the sector.

The government will legislate to exclude suppliers of private hire vehicle and taxi services from the Tour Operators’ Margin Scheme, except where these are supplied in conjunction with certain other travel services.

CONSTRUCTION INDUSTRY SCHEME

Enhanced HMRC powers to tackle CIS fraud

HMRC has enhanced powers to combat Construction Industry Scheme fraud:

Direct amendment of CIS deduction claims on Employer Payment Summary (EPS) where fraud suspected
Material materials cost eligibility test: Only direct purchasers of materials can claim deductions (tightened rules)
Rolling 12-month expenditure threshold: £3m threshold for deemed contractors
Failure to prevent fraud offence: New mandatory compliance obligation (similar to criminal finances offences)

CAPITAL GAINS TAX

Capital Gains Tax incorporation relief

From 6 April 2026, individuals, partners, and trustees transferring a business to a company in exchange for shares must claim incorporation relief through their Self Assessment tax return for the year of transfer. The claim will require details of the transaction, tax computations, and business type.

BADR rate increase

As previously announced, Business Asset Disposal Relief (BADR, formerly Entrepreneurs’ Relief) CGT rate increases from 14% to 18% on the first £1m of qualifying gains from 6 April 2026.

ELECTRIC VEHICLES AND MOTORING

EV mileage tax announced

From April 2028, electric vehicles (battery EV and plug-in hybrid EVs) will face a pay-per-mile tax:

Battery EV: 3 pence per mile
Plug-in Hybrid: 1.5 pence per mile

Implementation details (collection mechanism, exemptions) still under consultation.

First-Year Allowances for zero-emission cars and EV chargepoints

First-year allowances maintained for qualifying EV chargepoints
Zero-emission cars eligible for enhanced relief
Full expensing relief available for qualifying infrastructure

Budget, Tax

Budget 2025: Essential tax rates and thresholds

November 27, 2025 Debonair Management Services Limted

Income tax rates

Taxable income (not dividends and not for Scottish residents) £	Rate %	Tax £	Cumulative £
2026/27
Savings: 0–5,000	0	Nil	Nil
0–37,700	20	7,540.00	7,540.00
37,701–125,140	40	34,976.00	42,516.00
Over 125,140	45	–	–
2025/26
Savings: 0–5,000	0	Nil	Nil
0–37,700	20	7,540.00	7,540.00
37,701–125,140	40	34,976.00	42,516.00
Over 125,140	45	–	–

Tax rates for dividend income

Dividends within:	2026/27	2025/26
Basic rate band	10.75%	8.75%
Dividend allowance	£500	£500
Higher rate band	35.75%	33.75%
Dividend allowance	£500	£500
Additional rate band	39.35%	39.35%
Dividend allowance	£500	£500

Personal allowances and reliefs

	2026/27 £	2025/26 £
Personal allowance	12,570	12,570
Income limit for personal allowance	100,000	100,000
Allowances for couples
Marriage allowance	1,260	1,260
Married couples: minimum (born before 6 April 1935)	4,360	4,360
Married couples: maximum (born before 6 April 1935)	11,270	11,270
Income limit for married couples’ allowance, born before 6 April 1935	37,700	37,700
Blind person’s allowance	3,130	3,130
Rent-a-room relief	7,500	7,500
Trading income allowance	1,000	1,000
Property income allowance	1,000	1,000
Savings allowance – basic tax band	1,000	1,000
Savings allowance – higher tax band	500	500

Pension allowances

Tax year	2026/27 £	2025/26 £
Annual allowance (AA)	60,000	60,000
AA is tapered when adjusted income including pension contributions exceeds:	260,000	260,000
and net income excluding pension contributions exceeds:	200,000	200,000
Minimum tapered annual allowance	10,000	10,000
Money purchase annual allowance (MPAA)	10,000	10,000
Lump sum allowance	268,275	268,275
Lump sum and death benefit allowance	1,073,100	1,073,100

Corporation tax rates

Year from 1 April	2026	2025
Main rate	25%	25%
Small profits rate	19%	19%
Small profits rate where profits don’t exceed:	£50,000	£50,000
Marginal relief lower limit	£50,000	£50,000
Marginal relief upper limit	£250,000	£250,000
Standard fraction	3/200	3/200

CGT rates and annual exemptions

	Tax year	Annual exempt amount		Tax rate paid by
		Individuals PRs and trusts for disabled	General trusts	Individualswithin:		Trustees and PRs
				Basic rate band	Higher tax bands
		£	£	%	%	%
2026/27: exempt amount		3,000	1,500
BAD relief and Investors relief				18	18
Residential property and all other assets				18	24	24
Carried interest				32	32	32
2025/26: exempt amount		3,000	1,500
BAD relief and Investors relief				14	14
Residential property and all other assets				18	24	24
Carried interest				32	32	32

NIC rates and thresholds

NIC: Class 1 primary monthly thresholds

Employee (primary)	2026/27 £	2025/26 £
Lower earnings limit (LEL)	542	542
Primary threshold (PT)	1,048	1,048
Upper earnings limit (UEL)	4,189	4,189

NIC: Class 1 primary rates

Employee (primary)	2026/27	2025/26
Up to LEL	N/A	N/A
From LEL to PT	0%	0%
From PT to UEL	8%	8%
Above UEL	2%	2%

NIC: Class 1 secondary monthly thresholds

Employer (Secondary)	2026/27 £	2025/26 £
Secondary threshold (ST)	416	416
Upper secondary threshold for under 21s (UST)	4,189	4,189
Apprentice Upper secondary threshold (AUST) for under 25s	4,189	4,189
Veteran Upper Secondary Threshold (VUST)	4,189	4,189
Investment Zone Upper Secondary Threshold (IZUST)	2,083	2,083
Freeport Upper Secondary Threshold (FUST)	2,083	2,083

NIC: Class 1 secondary rates

Employer (Secondary)	2026/27	2025/26
Up to: ST, FUST, AUST, FUST, IZUST, VUST	0%	0%
Above: ST, UST, AUST, FUST, IZUST, VUST	15%	15%
Employment allowance – annual amount per company/group	£10,500	£10,500

NIC: Class 2 rates and thresholds

Tax year		Flat rate per week (note 1)	Share fishermen per week	Volunteer development workers per week	Small profits threshold (note 2)	Lower profits threshold (note 3)
Tax year		£	£	£	£	£
	2026/27	3.50	4.15	6.25	6,845	12,570
	2025/26	3.50	4.15	6.25	6,845	12,570

Notes:

Self-employed traders with profits below the small profits threshold do not have to pay class 2 NIC, but they are not entitled to a NI credit. They can pay class 2 NIC voluntarily.
From 2024/25 onwards there is no liability to class 2 NIC for self-employed traders with profits above the small profits threshold, but all self-employed traders with profits above the small profits threshold are entitled to an NI credit.

NIC: Class 3 rates

Tax year		Weekly rate £
	2026/27	17.80
	2025/26	17.75

NIC: Class 4 rates and thresholds

Tax year		Main rate	Additional rate	Lower profits limit	Upper profits limit
Tax year		%	%	£	£
	2026/27	6	2	12,570	50,270
	2025/26	6	2	12,570	50,270

VAT registration and deregistration limits

Effective date	Registration turnover £	Registration exception: turnover not exceeding £	Deregistration turnover £
1 April 2026	90,000	88,000	88,000
1 April 2025	90,000	88,000	88,000
1 April 2024	90,000	88,000	88,000

High-income child benefit charge (HICBC)

Period child benefit received	Lower income threshold £	Upper income threshold £
From 6 April 2026	60,000	80,000
From 6 April 2024	60,000	80,000
From 7 January 2013 to 5 April 2024	50,000	60,000

Annual tax on enveloped dwellings (ATED)

Property value £	2026/27 £	2025/26 £
500,001–1,000,000	4,450	4,450
1,000,0001–2,000,000	9,150	9,150
2,000,001–5,000,000	31,050	31,050
5,000,001–10,000,000	72,700	72,700
10,000,001–20,000,000	145,950	145,950
Over £20,000,000	292,350	292,350

Budget, Other

Chancellor mandates e-invoicing by 2029

November 27, 2025 Debonair Management Services Limted

The government will require electronic invoicing for all VAT invoices for business-to-business and business-to-government transactions from 2029.

The government has used its 2025 Budget to announce the long-anticipated arrival of electronic invoicing (e-invoicing) to the UK.

In a short update in the Budget report, the government stated that to “drive productivity further”, it will require the use of e-invoicing for all VAT invoices for business-to-business and business-to-government transactions from 1 April 2029.

Responding to a consultation launched back in February this year, the government today said it would be conducting “extensive stakeholder engagement from January 2026 to ensure stakeholder views and concerns are considered throughout the policy development process”.

It is expected that a final decision on the exact details of the system will be published at the 2026 Budget.

What is e-invoicing?

E-invoicing is the direct digital exchange of invoice data between buyers’ and suppliers’ systems in a standard format. It is not simply emailing a PDF, Word doc or image to another person or business.

Similar to the government’s Making Tax Digital (MTD) programme, software is required to send e-invoices. While specialist e-invoicing point solutions are available, accounting packages such as Sage and Xero have established capabilities in anticipation of a potential move.

E-invoicing pros and cons

Proponents of e-invoicing point to its ability to process invoices faster and with fewer errors, cut out invoice duplication, avoid fraudulent activity such as criminals intercepting invoices and changing bank details, and allow for a more streamlined audit and reporting process.

A Sage report published last year, based on interviews with 9,000 European small businesses, found that adopting e-invoicing can lead to annual savings of around €13,500 by nearly halving the time spent processing invoices, while Avalara’s research claims it could unlock nearly £9bn for the UK economy.

Widespread adoption of e-invoicing in the UK could also provide HMRC with more information it can use to close the gap between tax owed and tax collected. E-invoicing has proved largely successful in combating VAT evasion in South America, while Italy claims benefits of more than €4bn a year since introducing e-invoicing in 2019.

However, critics point to the additional administration and cost burdens placed on businesses forced to purchase, learn and use external software to comply, particularly for smaller organisations or those that send or receive relatively few invoices.

Phased approach ‘sensible’

Alex Baulf, Avalara’s VP of global indirect tax and e-invoicing, called the rollout a sensible move that gave UK companies a chance to embed e-invoicing as a business-as-usual process before adding tax reporting.

“The government doesn’t want to rock the economy or bring business to a standstill with the move from paper or PDF to e-invoicing,” he said. “With a four-corner model, the government doesn’t have to build any infrastructure to start with, and can look to phase in real-time reporting at a later date.”

For Richard Asquith, CEO of VATCalc, the move feels like an “efficiency drive” to ensure adoption, rather than an all-out drive to cut the tax gap.

“They appear to have gone light with the measures, just mandating exchange of e-invoices between businesses to ensure efficiency without imposing e-reporting to HMRC,” he said. “HMRC was burned by MTD for VAT, where it wanted an API-enabled ability to peer into businesses’ digital records and had to row back on that, so they don’t want to repeat that experience any time soon.”

Asquith added that the move towards standardised data and formats is not only what the industry tends to want, but also reflects HMRC’s preference for accounting packages to take care of the infrastructure side of things.

DMS Posts, Tax

Self-Employed? Is Incorporation Worthwhile?

October 14, 2025 Debonair Management Services Limted

It can still be beneficial to incorporate and extract funds by taking a small salary and extracting further profits in the form of dividends (see Tips 25, 26 and 27). However, increases in the rates of corporation tax, employer’s National Insurance and dividend tax a cut in the dividend allowance, the abolition of Class 2 National Insurance contributions and the cut in the main rate of Class 4 National Insurance contributions have reduced the advantages of incorporation in recent years and muddied the waters, meaning that now incorporation is not always beneficial and will depend on the profit levels. There is no substitute for doing the sums.

A self-employed trader will pay income tax on their profits at 20% where these fall in the basic rate band, at 40% where these fall in the higher rate band and at 45% where these fall in the additional rate band. They will also pay Class 4 National Insurance contributions at 6% on profits between £12,570 and £50,270 and at 2% on profits in excess of £50,270.

For a personal company, a typical tax-efficient profit extraction strategy is to pay a small salary and to extract further profits as dividends. For 2025/26, assuming the personal allowance has not been used up elsewhere, the optimal salary is £12,570, equal to the personal allowance and the primary threshold.

Dividends do not attract National Insurance contributions, so by incorporating and extracting profits as dividends, you will save Class 4 National Insurance contributions. Dividends also benefit from a tax-free dividend allowance, set at £500 for 2025/26.
Once the dividend allowance has been used up, dividends, taxed as the top slice of income, are taxed at 8.75% to the extent they fall in the basic rate band, 33.75% to the extent that they fall within the higher rate band and at 39.35% where they fall in the additional rate band.

It should be noted that dividends can only be paid from retained profits and for each class of share, shareholders must receive dividends in proportion to their shareholdings.
The company is a separate legal entity which pays corporation tax on its profits. From 1 April 2023 onwards, the rate of corporation tax depends on the level of profits. A small profits rate of 19% applies where taxable profits do not exceed the lower limit, with a main rate of 25% applying where taxable profits are more than the upper limit. However, the effective rate is reduced by marginal relief where profits are between the lower limit and the upper limit.

Where the company has no associated companies, the lower limit is £50,000 and the upper limit is £250,000. If the company has one or more associated companies, these limits are divided by the number of associated companies plus one. The limits are reduced proportionately where the accounting period is less than 12 months. The rate at which corporation tax is paid will affect the post-tax profits available for distribution as a dividend.

As personal circumstances differ, there is no substitute for crunching the numbers. Consideration should also be given as to whether the costs of incorporation outweigh the tax and National Insurance savings.

Self-Employed? Is Incorporation Worthwhile?
Harry is a sole trader, making profits of £50,000 a year. If he remains self-employed, in 2025/26, he will pay tax of £7,486 ((£50,000 – £12,570) @ 20%) on his profits. He will also pay Class 4 NICs of £2,245.80 ((£50,000 – £12,570) @ 6%). His total tax and NIC bill will be £9,731.80 leaving him with profits of £40,268.20.

If he incorporates the business and pays himself a salary of £12,570, assuming he is the sole employee and the director, he will not be entitled to the Employment Allowance. Therefore, the company will pay secondary NICs on the salary of £1,135.50 ((£12,570 – £5,000) @ 15%). The salary and the employer’s NIC are deductible in computing the company’s taxable profits, reducing the taxable profits to £36,295. As the profits are below the lower profits limit of £50,000, the company pays corporation tax at 19%, a tax bill of £6,8966, leaving post-tax profits of £29,399 to be extracted as a dividend.
The first £500 of the dividend is tax-free. The remaining £28,899 is taxed at 8.75%, a tax bill of £2,528.66 leaving him with £26,870.34 of the dividend. Together with the salary of £12,570, Harry retains £38,440.34 of his profits.

For 2025/26, he is marginally better off by remaining self-employed. He also saves the additional administration associated with running a company. However, if he incorporates, he will have the choice as to whether to extract income from the company and pay personal taxes on it or leave it in the company and only incur corporation tax on his profits.

Budget, DMS Posts, PAYE, Tax

Personal tax and benefits

November 1, 2024 Debonair Management Services Limted

Income Tax bands of taxable income

	Tax year 2024 to 2025	Tax year 2025 to 2026
Basic rate	£1 to £37,700	£1 to £37,700
Higher rate	£37,701 to £125,140	£37,701 to £125,140
Additional rate	Over £125,140	Over £125,140

Income Tax rates

Main rates	Tax year 2024 to 2025	Tax year 2025 to 2026
Basic rate	20%	20%
Higher rate	40%	40%
Additional rate	45%	45%

These figures apply to non-savings non-dividend income, including income from employment, property, or pensions. From 2017 to 2018, the main rates were separated into the main rates, the savings rates and the default rates.

Savings rates

Savings rates	Tax year 2024 to 2025	Tax year 2025 to 2026
Starting rate for savings	0%	0%
Savings basic rate	20%	20%
Savings higher rate	40%	40%
Savings additional rate	45%	45%

These figures apply to savings income.

Dividend rates	Tax year 2024 to 2025	Tax year 2025 to 2026
Dividend ordinary rate — for dividends otherwise taxable at the basic rate	8.75%	8.75%
Dividend upper rate — for dividends otherwise taxable at the higher rate	33.75%	33.75%
Dividend additional rate — for dividends otherwise taxable at the additional rate	39.35%	39.35%

These figures apply to dividend income received above the £500 tax-free dividend allowance.

Default rates	Tax year 2024 to 2025	Tax year 2025 to 2026
Default basic rate	20%	20%
Default higher rate	40%	40%
Default additional rate	45%	45%

These figures apply to non-savings and non-dividend income of any taxpayer that is not subject to either the main rates or the Scottish rates of Income Tax.

Starting rates for savings income

	Tax year 2024 to 2025	Tax year 2025 to 2026
Starting rate for savings	0%	0%
Starting rate limit for savings	£5,000	£5,000

Income Tax rates for trustees’ income

	Tax year 2024 to 2025	Tax year 2025 to 2026
Thresholds	£500 de minimis trusts amount	£500 de minimis trusts amount
Dividend ordinary rate	8.75%	8.75%
Default basic rate	20%	20%
Dividend trust rate for accumulated and discretionary dividend income	39.35%	39.35%
Trust rate for other accumulated and discretionary income	45%	45%

Income Tax allowances

Personal Allowance

	Tax year 2024 to 2025	Tax year 2025 to 2026
Personal allowance	£12,570	£12,570
Income limit for Personal Allowance	£100,000	£100,000
Income limit for Married Couple’s Allowance	£37,000	£37,700

The Personal Allowance reduces where the income is above £100,000 — by £1 for every £2 of income above the £100,000 limit. This reduction applies irrespective of date of birth.

The income limit for Married Couple’s Allowance is an age-related allowance. It is reduced by £1 for every £2 of income over this limit.

Marriage Allowance

	Tax year 2024 to 2025	Tax year 2025 to 2026
Marriage Allowance	£1,260	£1,260

This transferable allowance is available to married couples and civil partners who are not in receipt of Married Couple’s Allowance. A spouse or civil partner who is not liable to Income Tax, or not liable at the higher or additional rates, can transfer this amount of their unused personal allowance to their spouse or civil partner. The recipient must not be liable to Income Tax at the higher or additional rates.

Married Couple’s Allowance for those born before 6 April 1935

	Tax year 2024 to 2025	Tax year 2025 to 2026
Maximum amount of Married Couple’s Allowance	£11,080	£11,270
Minimum amount of Married Couple’s Allowance	£4,280	£4,360

The relief for this allowance is given at 10%.

	Tax year 2024 to 2025	Tax year 2025 to 2026
Blind Person’s Allowance	£3,070	£3,130

Dividend Allowance

	Tax year 2024 to 2025	Tax year 2025 to 2026
Dividend Allowance	£500	£500

Personal Savings Allowance

	Tax year 2024 to 2025	Tax year 2025 to 2026
Personal Savings Allowance for basic rate taxpayers	£1,000	£1,000
Personal Savings Allowance for higher taxpayers	£500	£500

From April 2016, the new Personal Savings Allowance means that basic rate taxpayers do not have to pay tax on the first £1,000 of savings income they receive and higher rate taxpayers do not have tax to pay on their first £500 of savings income.

Qualifying Care relief

As announced at Spring Budget 2023, the government will legislate to increase the amount of Income Tax relief available for foster carers and shared lives carers using Qualifying Care Relief. This is an annual increase in line with CPI inflation. The changes will take effect from 6 April 2025, for the tax year 2025 to 2026.

	Tax year 2024 to 2025	Tax year 2025 to 2026
Annual fixed amount	£19,360	£19,690
Weekly amount — children under 11 years	£405	£415
Weekly amount — children 11 years or older	£485	£495
Weekly amount — adults	£485	£495

Company car tax — all cars

CO2 emissions, g/km	Electric range (miles)	Appropriate percentage (%) for 2024 to 2025	Appropriate percentage (%) for 2025 to 2026	Appropriate percentage (%) for 2026 to 2027	Appropriate percentage (%) for 2027 to 2028	Appropriate percentage (%) for 2028 to 2029	Appropriate percentage (%) for 2029 to 2030
0	Not applicable	2	3	4	5	7	9
1 to 50	More than 130	2	3	4	5	18	19
1 to 50	70 to 129	5	6	7	8	18	19
1 to 50	40 to 69	8	9	10	11	18	19
1 to 50	30 to 39	12	13	14	15	18	19
1 to 50	Less than 30	14	15	16	17	18	19
51 to 54	—	15	16	17	18	19	20
55 to 59	—	16	17	18	19	20	21
60 to 64	—	17	18	19	20	21	22
65 to 69	—	18	19	20	21	22	23
70 to 74	—	19	20	21	21	22	23
75 to 79	—	20	21	21	21	22	23
80 to 84	—	21	22	22	22	23	24
85 to 89	—	22	23	23	23	24	25
90 to 94	—	23	24	24	24	25	26
95 to 99	—	24	25	25	25	26	27
100 to 104	—	25	26	26	26	27	28
105 to 109	—	26	27	27	27	28	29
110 to 114	—	27	28	28	28	29	30
115 to 119	—	28	29	29	29	30	31
120 to 124	—	29	30	30	30	31	32
125 to 129	—	30	31	31	31	32	33
130 to 134	—	31	32	32	32	33	34
135 to 139	—	32	33	33	33	34	35
140 to 144	—	33	34	34	34	35	36
145 to 149	—	34	35	35	35	36	37
150 to 154	—	35	36	36	36	37	38
155 to 159	—	36	37	37	37	38	39
160 and over	—	37	37	37	37	38	39

For all cars, drivers must add 4% to their appropriate percentage if the car is propelled solely by diesel (up to a maximum of 37%). Cars that meet the Real Driving Emissions Step 2 (RDE2) standard are exempt from the diesel supplement. The RDE2 standard sets a maximum permitted level of car NOx emissions in real world driving situations, and it is measured through portable emissions-measuring equipment in a variety of real driving trips. Rates for fully electric cars (0 grams per km) are capped at 5%.

Rates for ultra-low emission cars (1 to 74 grams per km) are capped at 20% for the tax year 2025 to 2026. They are capped at 21% for the tax years 2026 to 2027 and 2027 to 2028. Rates for bands 75 to 170 grams per km and above will remain frozen for the 2026 to 2027 and 2027 to 2028 tax years.

National Insurance contributions

Employee and employer Class 1 rates and thresholds (£ per week)

	Tax year 2024 to 2025	Tax year 2025 to 2026
Lower Earnings Limit (LEL)	£123	£125
Primary Threshold (PT)	£242	£242
Secondary Threshold (ST)	£175	£96
Upper Earnings Limit (UEL)	£967	£967
Upper Secondary Threshold for under 21s	£967	£967
Apprentice Upper Secondary Threshold (AUST) for under 25s	£967	£967
Freeport Upper Secondary Threshold	£481	£481
Investment Zones Upper Secondary Threshold	£481	£481
Veteran Upper Secondary Threshold	£967	£967
Employment Allowance (per eligible employer)	£5,000 per year	£10,500 per year

Employee’s (primary) Class 1 contribution rates (per cent)

Earnings band	Tax year 2024 to 2025	Tax year 2025 to 2026
Below Lower Earnings Limit (LEL)	Not applicable	Not applicable
Lower Earning Limit (LEL) to Primary Threshold (PT)	0%	0%
Primary Threshold (PT) to Upper Earnings Limit (UEL)	8%	8%
Above Upper Earnings Limit (UEL)	2%	2%

Married woman’s reduced rate for (primary) Class 1 contribution rates

	Tax year 2024 to 2025	Tax year 2025 to 2026
Weekly earnings from between the Primary Threshold (PT) and Upper Earnings Limit (UEL)	1.85%	1.85%
Weekly earnings above the Upper Earnings Limit (UEL)	2%	2%

Employer’s (secondary) Class 1 contribution rates

Earnings band	Tax year 2024 to 2025	Tax year 2025 to 2026
Below Secondary Threshold (ST)	0%	0%
Above Secondary Threshold (ST)	13.8%	15%

Employer’s (secondary) Class 1 contribution rates for employees under 21

Earnings band	Tax year 2024 to 2025	Tax year 2025 to 2026
Below Upper Secondary Threshold (UST)	0%	0%
Above Upper Secondary Threshold (UST)	13.8%	15%

Employer’s (secondary) Class 1 contribution rates for Apprentices under 25

Earnings band	Tax year 2024 to 2025	Tax year 2025 to 2026
Below Apprentice Upper Secondary Threshold (AUST)	0%	0%
Above Apprentice Upper Secondary Threshold (AUST)	13.8%	15%

Employer’s (secondary) Class 1 contribution rates for eligible employees of Freeports

Earnings band	Tax year 2024 to 2025	Tax year 2025 to 2026
Below Freeports Upper Secondary Threshold	0%	0%
Above Freeports Upper Secondary Threshold	13.8%	15%

Employer’s (secondary) Class 1 contribution rates for eligible employees of Investment Zones

Earnings band	Tax year 2024 to 2025	Tax year 2025 to 2026
Below Investment Zone Upper Secondary Threshold	0%	0%
Above Investment Zone Upper Secondary Threshold	13.8%	15%

Employer’s (secondary) Class 1 contribution rates for qualifying veterans

Earnings band	Tax year 2024 to 2025	Tax year 2025 to 2026
Below Veterans Upper Secondary Threshold (VUST)	0%	0%
Above Veterans Upper Secondary Threshold (VUST)	13.8%	15%

Self-employed Class 2 contributions rates and thresholds (£ per week)

Class 2 thresholds (£ annual profit)

	Tax year 2024 to 2025	Tax year 2025 to 2026
Small Profits Thresholds (SPT)	£6,725	£6,845
Lower Profits Thresholds (LPT)	£12,570	£12,570

Class 2 contribution rates (£ per week)

Annual Profits Band	Tax year 2024 to 2025	Tax year 2025 to 2026
Below Small Profits Threshold (SPT)	£3.45 (voluntary)	£3.50 (voluntary)
Above Small Profits Threshold (SPT) to Lower Profits Threshold (LPT)	£0	£0
Above Lower Profits Threshold (LPT)	£0	£0
Special Class 2 rate for share fisherman	£4.10	£4.15
Special Class 2 rate for volunteer development workers	£6.15	£6.25

Class 3 National Insurance contributions: other rates and thresholds (£ per week)

	Tax year 2024 to 2025	Tax year 2025 to 2026
Voluntary contributions	£17.45	£17.75

Self-employed Class 4 rates and thresholds (£ per year)

	Tax year 2024 to 2025	Tax year 2025 to 2026
Lower Profits Limit (LPL)	£12,570	£12,570
Upper Profits Limit (UPL)	£50,270	£50,270

Class 4 contribution rates

Annual Profits band	Tax year 2024 to 2025	Tax year 2025 to 2026
Below Lower Profits Limit (LPL)	0%	0%
Lower profits Limit (LPL) to Upper Profits Limit (UPL)	6%	6%
Above Upper Profits Limit (UPL)	2%	2%

Self-employed National Insurance Contributions are calculated on an annual basis, therefore, the Lower Profits Limit was set at an average threshold of £11,908 for the 2022 to 2023 tax year which is equivalent to 13 weeks of the threshold at £9,880 and 39 weeks at £12,570, reflecting the position for employees.

Child Benefit, Guardian’s Allowance and tax credits

Following the publication of Consumer Price Index (CPI) figures for September 2023, the government announced at Autumn Statement 2023 the new benefits rates for 2024 to 2025.

Child Benefit (£ per week)

	Tax year 2024 to 2025	Tax year 2025 to 2026
Eldest or only child	£25.60	£26.05
Other children	£16.95	£17.25

Guardian’s Allowance (£ per week)

	Tax year 2024 to 2025	Tax year 2025 to 2026
Guardian’s Allowance	£21.75	£22.10

As there will be no tax credit awards after 5 April 2025, there will be no changes to rates for the tax year 2025 to 2026.

Working Tax Credit (£ per year unless stated)

	Tax year 2024 to 2025	Tax year 2025 to 2026
Basic element	£2,435	Not applicable
Couple and lone parent element	£2,500	Not applicable
30 hour element	£1,015	Not applicable
Disabled worker element	£3,935	Not applicable
Severe disability element	£1,705	Not applicable

Childcare element of Working Tax Credit (£ per year unless stated)

	Tax year 2024 to 2025	Tax year 2025 to 2026
Maximum eligible cost for one child	£175 per week	Not applicable
Maximum eligible cost for two or more children	£300 per week	Not applicable
Percentage of eligible costs covered	70%	Not applicable

Child Tax Credit (£ per year unless stated)

	Tax year 2024 to 2025	Tax year 2025 to 2026
Family element	£545	Not applicable
Child element	£3,455	Not applicable
Disabled child element	£4,170	Not applicable
Severely disabled child element	£5,850	Not applicable
Income threshold	£7,955	Not applicable
Withdrawal rate (%)	41%	Not applicable
First threshold for those entitled to Child Tax Credit only	£19,995	Not applicable
Income rise disregard	£2,500	Not applicable
Income fall disregard	£2,500	Not applicable

Capital, assets and property

Pensions tax relief

	Tax year 2024 to 2025	Tax year 2025 to 2026
Lump Sum Allowance	£268,275	£268,275
Lump Sum and Death Benefit Allowance	£1,073,100	£1,073,100
Overseas Transfer Allowance	£1,073,100	£1,073,100
Annual Allowance Limit	£60,000	£60,000
Money Purchase Annual Allowance	£10,000	£10,000
Tapered Annual Allowance (applies when an individual has ‘adjusted income’ over this amount provided the ‘threshold income’ test is met)	£260,000	£260,000

Tax free savings accounts

	Tax year 2024 to 2025	Tax year 2025 to 2026
Individual Savings Account (ISA) subscription limit	£20,000	£20,000
Junior ISA subscription limit	£9,000	£9,000
Child Trust Fund (CTF) subscription limit	£9,000	£9,000

Capital Gains Tax

Rates for gains on assets other than residential property and carried interest

	Tax year 2024 to 2025 (6 April 2024 to 29 October 2024)	Tax year 2024 to 2025 (30 October 2024 to 5 April 2025)	Tax year 2025 to 2026
Income Tax basic rate payer	10%	18%	18%
Income Tax higher rate payer	20%	24%	24%

Rates for individuals for gains on residential property which is not eligible for Private Residence Relief

	Tax year 2024 to 2025 (6 April 2024 to 29 October 2024)	Tax year 2024 to 2025 (30 October 2024 to 5 April 2025)	Tax year 2025 to 2026
Income Tax basic rate payer	18%	18%	18%
Income Tax higher rate payer	24%	24%	24%

Rates for individuals for gains on carried interest

	Tax year 2024 to 2025 (6 April 2024 to 29 October 2024)	Tax year 2024 to 2025 (30 October 2024 to 5 April 2025)	Tax year 2025 to 2026
Income Tax basic rate payer	18%	18%	32%
Income Tax higher rate payer	28%	28%	32%

Rate for trustees and personal representatives for gains on assets other than residential property and carried interest

	Tax year 2024 to 2025 (6 April 2024 to 29 October 2024)	Tax year 2024 to 2025 (30 October 2024 to 5 April 2025)	Tax year 2025 to 2026
Income Tax basic rate payer	20%	24%	24%
Income Tax higher rate payer	20%	24%	24%

Rate for trustees and personal representatives for gains on residential property which is not eligible for Private Residence Relief

	Tax year 2024 to 2025 (6 April 2024 to 29 October 2024)	Tax year 2024 to 2025 (30 October 2024 to 5 April 2025)	Tax year 2025 to 2026
Income Tax basic rate payer	24%	24%	24%
Income Tax higher rate payer	24%	24%	24%

Rate for personal representatives for gains on carried interest

	Tax year 2024 to 2025 (6 April 2024 to 29 October 2024)	Tax year 2024 to 2025 (30 October 2024 to 5 April 2025)	Tax year 2025 to 2026
Income Tax basic rate payer	28%	28%	32%
Income Tax higher rate payer	28%	28%	32%

Annual exempt amount (AEA) for individuals and personal representatives

	Tax year 2024 to 2025 (6 April 2024 to 29 October 2024)	Tax year 2024 to 2025 (30 October 2024 to 5 April 2025)	Tax year 2025 to 2026
Income Tax basic rate payer	£3,000	£3,000	£3,000
Income Tax higher rate payer	£3,000	£3,000	£3,000

Annual exempt amount (AEA) for most trustees

	Tax year 2024 to 2025 (6 April 2024 to 29 October 2024)	Tax year 2024 to 2025 (30 October 2024 to 5 April 2025)	Tax year 2025 to 2026
Income Tax basic rate payer	£1,500	£1,500	£1,500
Income Tax higher rate payer	£1,500	£1,500	£1,500

Rate on gains subject to business asset disposal relief

	Tax year 2024 to 2025 (6 April 2024 to 29 October 2024)	Tax year 2024 to 2025 (30 October 2024 to 5 April 2025)	Tax year 2025 to 2026
Income Tax basic rate payer	10%	10%	14%
Income Tax higher rate payer	10%	10%	14%

Rate on gains subject to investors’ relief

	Tax year 2024 to 2025 (6 April 2024 to 29 October 2024)	Tax year 2024 to 2025 (30 October 2024 to 5 April 2025)	Tax year 2025 to 2026
Income Tax basic rate payer	10%	10%	14%
Income Tax higher rate payer	10%	10%	14%

Business asset disposal relief: lifetime limit on qualifying gains

	Tax year 2024 to 2025 (6 April 2024 to 29 October 2024)	Tax year 2024 to 2025 (30 October 2024 to 5 April 2025)	Tax year 2025 to 2026
Income Tax basic rate payer	£1 million	£1 million	£1 million
Income Tax higher rate payer	£1 million	£1 million	£1 million

Investors’ relief: lifetime limit on gains for external investors

	Tax year 2024 to 2025 (6 April 2024 to 29 October 2024)	Tax year 2024 to 2025 (30 October 2024 to 5 April 2025)	Tax year 2025 to 2026
Income Tax basic rate payer	£10 million	£1 million	£1 million
Income Tax higher rate payer	£10 million	£1 million	£1 million

Temporary Repatriation Facility

	Tax year 2025 to 2026	Tax year 2026 to 2027	Tax year 2027 to 2028
Rate of designated foreign income and gains (FIG)	12%	12%	15%

The Temporary Repatriation Facility (TRF) is available to former remittance basis users who have unremitted foreign income and gains for tax years prior to 2025 to 2026. Individuals can elect to pay tax at the TRF rate on offshore funds that they designate. The designated funds will then not be taxed on remittance to the UK. Former remittance basis users can also use the TRF to designate distributions from trust structures, which are matched to foreign income and gains which arose prior to April 2025.

Inheritance Tax

	Tax year 2024 to 2025	Tax year 2025 to 2026
Rate (for estates)	40%	40%
Reduced rate (for estates leaving 10% or more to charity)	36%	36%
Rate (for chargeable lifetime transfers)	20%	20%
Nil-rate band limit	£325,000	£325,000
Residence nil-rate band limit	£175,000	£175,000
Taper threshold for residence nil-rate band	£2 million	£2 million

Stamp Duty Land Tax — residential property from 23 September 2022 to 30 October 2024

Property value	Rate (on portion of value above threshold)	Rate (on portion of value above threshold) if purchase is of an additional residential property	Rate (on portion of value above threshold) if purchase is of residential property by certain non-UK residents	Rate (on portion of value above threshold) if purchase is of an additional residential property and by certain non-UK residents
£0 to £250,000	0%	3%	2%	5%
£250,001 to £925,000	5%	8%	7%	10%
£925,001 to £1.5 million	10%	13%	12%	15%
Over £1.5 million	12%	15%	14%	17%

Stamp Duty Land Tax — residential property from 31 October 2024 to 31 March 2025

Property value	Rate (on portion of value above threshold)	Rate (on portion of value above threshold) if purchase is of an additional residential property	Rate (on portion of value above threshold) if purchase is of residential property by certain non-UK residents	Rate (on portion of value above threshold) if purchase is of an additional residential property and by certain non-UK residents
£0 to £250,000	0%	5%	2%	7%
£250,001 to £925,000	5%	10%	7%	12%
£925,001 to £1.5 million	10%	15%	12%	17%
Over £1.5 million	12%	17%	14%	19%

Stamp Duty Land Tax — residential property from 1 April 2025

Property value	Rate (on portion of value above threshold)	Rate (on portion of value above threshold) if purchase is of an additional residential property	Rate (on portion of value above threshold) if purchase is of residential property by certain non-UK residents	Rate (on portion of value above threshold) if purchase is of an additional residential property and by certain non-UK residents
£0 to £125,000	0%	5%	2%	7%
£125,001 to £250,000	2%	7%	4%	9%
£250,001 to £925,000	5%	10%	7%	12%
£925,001 to £1.5 million	10%	15%	12%	17%
Over £1.5 million	12%	17%	14%	19%

Check HMRC guidance on whether the higher rate applies and whether a purchase is a ‘non-resident’ transaction.