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.
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%.
Blind Person’s Allowance
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)
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.
Stamp Duty Land Tax — residential leases between 23 September 2022 and 31 March 2025
Net Present Value (NPV) of the rent
Rate (on portion of value above threshold)
£0 to £250,000
0%
Over £250,000
1%
Rates are increased by 2 percentage points (%) for certain ‘non-resident’ transactions.
Stamp Duty Land Tax — residential leases from 1 April 2025
Net Present Value (NPV) of the rent
Rate (on portion of value above threshold)
£0 to £125,000
0%
Over £125,000
1%
Rates are increased by 2 percentage points (%) for certain ‘non-resident’ transactions.
Stamp Duty Land Tax — rates for first-time buyers purchasing properties worth £625,000 or less from 23 September 2022 to 31 March 2025
Property value
Rate (on portion of value above threshold) if purchase qualifies for first-time buyer relief
£0 to £425,000
0%
£425,001 to £625,000
5%
Rates are increased by 2 percentage points (%) for certain ‘non-resident’ transactions.
Stamp Duty Land Tax — rates for first time-buyers purchasing properties worth £500,000 or less from 1 April 2025
Property value
Rate (on portion of value above threshold) if purchase qualifies for first-time buyer relief
£0 to £300,000
0%
£300,001 to £500,000
5%
Rates are increased by 2 percentage points (%) for certain ‘non-resident’ transactions.
Stamp Duty Land Tax — higher rate for certain corporate transactions involving dwellings worth more than £500,000 from 20 March 2014 to 30 October 2024
Property value
Rate on whole of purchase price
Over £500,000
15%
Rates are increased by 2 percentage points (%) for certain ‘non-resident’ transactions.
Stamp Duty Land Tax — higher rate for certain corporate transactions involving dwellings worth more than £500,000 from 31 October 2024
Property value
Rate on whole of purchase price
Over £500,000
17%
Rates are increased by 2 percentage points (%) for certain ‘non-resident’ transactions.
Stamp Duty Land Tax — non-residential property on or after 17 March 2016
Purchase and Premium Transactions
Property Value
Rate (on portion of value above threshold)
£0 to £150,000
0%
£150,001 to £250,000
2%
£250,001 and over
5%
Stamp Duty Land Tax — non-residential leases on or after 17 March 2016
Net Present Value (NPV) of the lease
Rate (on portion of value above threshold)
£0 to £150,000
0%
£150,001 to £5 million
1%
Over £5 million
2%
Annual Tax on Enveloped Dwellings (ATED)
The ATED charges increase automatically each year in line with inflation (based on the previous September’s Consumer Price Index (CPI)).
The ATED annual charges will rise by 1.7% from 1 April 2025 in line with the September 2024 CPI.
The following table shows the property value band and what the revised charges will be for the 2024 to 2025 and 2025 to 2026 chargeable period.
Taxable value of the property
Charge for tax year 2024 to 2025
Charge for tax year 2025 to 2026
£500,001 to £1 million
£4,400
£4,450
£1,000,001 to £2 million
£9,000
£9,150
£2,000,001 to £5 million
£30,550
£31,050
£5,000,001 to £10 million
£71,500
£72,700
£10,000,001 to £20 million
£143,550
£145,950
Over £20 million
£287,500
£292,350
Stamp Duty and Stamp Duty Reserve Tax
No Stamp Duty is charged where the certified consideration is less than £1,000.
Stamp Duty is charged on the purchase of own shares by a company under section 690 Companies Act 2006. The SH03 form is the chargeable instrument.
Where an instrument transfers either Intellectual Property (IP) or goodwill and shares, Stamp Duty is not chargeable on the consideration that relates to the IP or goodwill. A just and reasonable apportionment must be made.
Where an instrument grants a call option, and is itself a marketable security, Stamp Duty is charged at 0.5% of the consideration given for the premium.
Transfers of, and agreements to transfer securities
Standard Rate
Higher Rate
Stamp Duty
0.5% (rounded up to next £5)
Not applicable
Stamp Duty Reserve Tax
0.5%
Not applicable
Transfers of securities to clearance services and depositary receipt issuers
Standard Rate
Higher Rate
Stamp Duty
Not applicable
1.5% (rounded up to next £5)
Stamp Duty Reserve Tax
Not applicable
1.5%
Some clearance services choose to elect into the standard 0.5% STS regime. No 1.5% charge arises on transfers to such clearance services.
Rates for transfers on sale of interests in partnerships which hold shares and certain other securities
The Stamp Duty charge is capped at 0.5% of the market value of any shares held by the partnership (less any loans secured on them), multiplied by the percentage partnership interest transferred.
Bearer instruments
Transaction
Stamp Duty
Stamp Duty Reserve Tax
Transfer of bearer instrument
1.5% (rounded up to next £5)
0.5%
Transfer of non-UK bearer instrument by usage
0.2% of market value (rounded up to next £5)
Not applicable
Transfer of deposit certificate for stock of single non-UK company
0.2% of market value (rounded up to next £5)
Not applicable
In 2015 the Companies Act 2006 was amended to prohibit the creation of bearer shares by UK companies, and all existing bearer shares had to be cancelled or converted into registered shares.
Therefore, the charge remains only on the transfer on sale of bearer shares issued by or on behalf of non-UK companies, if the transfer occurs in the UK.
It may also apply on the transfer of certain bearer debt securities.
Stamp Duty on legacy land transactions
Where an agreement for a land transaction was entered into on or before 10 July 2003, but the instrument legally completing that contract is executed after that date, then the transaction will be subject to Stamp Duty, not Stamp Duty Land Tax. However, if the contract was not substantially performed before 10 July 2003 and has been varied, or rights under it have been assigned or sub-sold after 10 July 2003, Stamp Duty Land Tax may apply on completion.
If an instrument was executed to complete a land transaction at the time of the original transfer (but is only now being presented to HMRC), then the rate in force at that time will apply.
Freehold conveyances and transfers for instruments legally completing contracts made on or after 3 July 1997
The Stamp Duty charged is rounded to the next £5. For instruments legally completing contracts made on or before 2 July 1997, the rate is 1%.
Certified transfer value
Instruments executed between 28 March 2000 and 16 March 2005
Instruments executed between 17 March 2005 and 22 March 2006
Instruments executed after 22 March 2006
£60,000 and under
nil
nil
nil
£120,000 and under
1%
nil
nil
£125,000 and under
1%
1%
nil
£250,000 and under
1%
1%
1%
£500,000 and under
3%
3%
3%
Over £500,000 or uncertified
4%
4%
4%
Leasehold property — average rent of lease
The rates in the following table are based on the average rent of the lease.
The Stamp Duty charged is rounded to the next £5.
Stamp Duty rates: leasehold — average rent
Term of lease
Rate
7 years or less — annual rent £5,000 or less
nil
7 years or less — annual rent more than £5,000
1%
7 to 35 years
2%
35 to 100 years
12%
Over 100 years
24%
Leasehold property — lease premium
The rates in the following table are based on the certified value in the transfer document.
The Stamp Duty charged is rounded to the next £5.
Stamp Duty rates: leasehold — on lease premium
Certified value Rate
Rate
£60,000, annual rent £600 or less
nil
£250,000
1%
£500,000
3%
More than £500,000
4%
Business and financial services
Corporation Tax rates
Financial year 2023 to 2024
Financial year 2024 to 2025
Financial year 2025 to 2026
Main rate
25%
25%
25%
Small profits rate
19%
19%
19%
Lower threshold
£50,000
£50,000
£50,000
Upper threshold
£250,000
£250,000
£250,000
Marginal relief standard fraction
3/200ths
3/200ths
3/200ths
North Sea oil and gas ring fence profits
See footnote
See footnote
See footnote
Marginal relief is available for companies with profits between £50,000 and £250,000. Find out to how to calculate marginal relief.
For North Sea oil and gas ring fence profits the main rate is 30% and the small profits rate is 19%. The marginal relief ring fence fraction is 11/400ths. The lower and upper limits for ring fence profits are £50,000 and £250,000 respectively.
Corporation Tax allowance and reliefs
Financial year 2024 to 2025
Financial year 2025 to 2026
Plant and machinery: main rate expenditure
18%
18%
Plant and machinery: special rate expenditure
6%
6%
Structures and Building Allowance (SBA)
3%
3%
Annual investment allowance (AIA)
£1 million
£1 million
Enhanced Capital Allowances in Freeports
100%
100%
Enhanced Capital Allowances in Investment Zones
100%
100%
Enhanced Structures and Buildings Allowance in Freeports
10%
10%
Enhanced Structures and Buildings Allowance in Investment Zones
10%
10%
50% Special Rate First Year Allowance
50%
50%
Full Expensing: 100% First Year Allowance
100%
100%
Research and Development (R&D) tax credits SME scheme deduction rate
Not applicable
Not applicable
R&D tax credits SME scheme payable credit
Not applicable
Not applicable
R&D Intensive SME deduction rate
186%
186%
R&D Intensive SME payable credit
14.5%
14.5%
R&D Intensive SME intensity ratio
30%
30%
R&D Expenditure Credit
Not applicable
Not applicable
R&D Merged Scheme expenditure credit
20%
20%
Patent Box
10%
10%
Film tax relief
25% or 34%
25% or 34%
High-end TV tax relief
25% or 34%
25% or 34%
Videogames tax relief
25% or 34%
25% or 34%
Animation tax relief
25% or 39%
25% or 39%
Children’s TV tax relief
25% or 39%
25% or 39%
Open ended investment companies and authorised unit trusts
20%
20%
From 1 January 2024 an Audio-Visual Expenditure Credit and a Video Games Expenditure Credit will be implemented. The Video Games Expenditure Credit will have a rate of 34%. Under the Audio-Visual Expenditure Credit, film and high end TV will be eligible for a rate of 34% and animation and children’s TV will be eligible for a rate of 39%.
For open ended investment companies and authorised unit trusts the applicable corporation tax rate is 20%.
The secondary class 1 NIC rates and thresholds (paid by employers) were not altered in the Spring Statement, and the rate is increasing from 13.8% to 15.05% on 6 April 2022.
For 2022/23 the various secondary class 1 NIC thresholds are:
Secondary class 1 NIC
Thresholds
For most employees the employer pays at 15.05% on wages:
Per week:
£175
Per month:
£758
Per year:
£9,100
If the employee is an apprentice or aged under 21 employer pays class 1 NIC at 15.05% on wages above:
Per week:
£967
Per month:
£4,189
Per year:
£50,270
For new employees working at least 60% of their time in a Freeport site the employer can claim relief from class 1 NIC on wages up to:
Per week:
£481
Per month:
£2,083
Per year:
£25,000
Employees’ class 1 NIC
The rates of primary class 1 NIC paid by employees are increasing on 6 April 2022 from 12% to 13.25% and from 2% to 3.25% for the upper rate.
The lower earnings limit (LEL) has not been changed from the proposed level for 2022/23, which will be: £123 per week, £533 per month, £6,396 per year. On earnings between the LEL and the primary threshold, the employee pays class NIC at 0%, thus receives NIC credit for those wages.
The upper earnings limit (UEL) has also not been changed by the Spring Statement, and will stay at the proposed thresholds for 2022/23 of £967 per week, £4,189 per month, £50,270 per year. On earnings above the UEL, the employee will pay class 1 NIC at 3.35% for 2022/23.
The complication introduced by the Spring Statement is that the primary threshold (PT) for class 1 NIC will change part way through the tax year on 6 July 2022. The employee will pay class 1 NIC at 13.25% on earnings between the LEL and the PT for 2022/23.
Class 1 NIC primary thresholds
6 April to 5 July 2022
6 July 2022 to 5 April 2023
Per week
£190
£242
Per month
£823
£1048
Per year
£9,880
£12,570
As NIC is paid according to the pay period, and is not cumulative, only nine months of earnings (from July 2022 to March 2023) will benefit from the higher PT.
Company directors tend to use an annual or quarterly earnings period. Those on quarterly pay will use the lower threshold for the first quarter to 5 July 2022, and the higher PT for the remainder of the year. Those on annual earnings period will use a PT of £11,908 for 2022/23 as specified in clause 4(2) of the National Insurance Contributions (Increase of Thresholds) Bill 2022.
Self-employed class 4
The lower profits limit (LPL), from which class 4 NIC becomes payable, is also increased to align with the personal allowance of £12,570, but over two years. The upper profits limit is frozen at £50,270.
Tax Year
Main rate
Additional rate
LPL
Upper profits limit
2022/23
10.25%
3.25%
£11,908
£50,270
2023/24
10.25%*
3.25%*
£12,570
£50,270
* Including Health and Social Care levy
For 2022/23 the LPL will be £11,908, that is nine months of the increased level, to make it equivalent to the same NIC allowance enjoyed by employees. Although the self-employed individual will pay class 4 NIC at the main rate of 10.25%, which is three percentage points lower than the class 1 NIC paid on the same income band by an employee.
Self-employed class 2 NIC
The class 2 NIC paid by the self-employed creates a contribution record for the individual, unlike the class 4 NIC, which is a pure tax.
The class 2 small profits threshold (SPT) will remain in place from April 2022, but the individual will not be liable to pay class 2 NIC until their profits exceed the lower profits threshold for the tax year, which is aligned with the lower profits threshold for class 4 NIC.
Tax year
Flat rate per week
Small profits threshold
Lower profits limit
2022/23
£3.15
£6,725
£11,908
2023/24
TBA
TBA
£12,570
New class 2 NI credit
Where the individual has annual profits between the SPT and the LPL, they will effectively build up a NI credit for that year, while paying zero class 2 NIC. Note that the taxpayer has to make profits at least equal to the SPT for the year in order to benefit from this class 2 NI credit.
In order to receive the class 2 NI credit the taxpayer will have to submit a tax return, although if they have no other income in the year they will have no tax to pay.
The introduction of the class 2 NI credit does not eliminate the need for voluntary class 2 NIC payments. Where the trading profits are less than the SPT the individual may still wish to pay voluntary class 2 NIC in order to maintain their contribution record and qualify for the state pension, as well as for other contributory benefits.
aligning the class 1 national insurance contributions primary threshold with the personal allowance of £12,570.
As I predicted it is impossible to implement this change in payrolls run for April 2022, as it takes time to rewrite payroll software, but it will come into force from 6 July 2022.
Note that the secondary class 1 NIC threshold, where employers start paying class 1 NIC, will not be raised to align with the primary threshold. Employers will pay class 1 NIC at 15.05% on most employees’ salaries above £9,100 from 6 April 2022. Different secondary class 1 NIC thresholds apply for apprentices and freelance employees.
Self-employed NICs
The Chancellor has gone further than I expected, with plans to align the thresholds where the self-employed start paying class 2 NIC and class 4 NIC, with the personal allowance, but not immediately.
The class 4 NIC lower profits limit will rise to £11,908 for 2022/23 and then be aligned with the personal allowance of £12,570 from 6 April 2023. This two-step increase is presumably implemented to shadow the delayed rise in class 1 NIC from 6 July 2022.
Class 2 NIC is currently payable once the individual’s profits for the year exceed the small profits threshold of £6,515. This relatively low payment threshold exists to allow self-employed individuals with small profits to build up a contribution record for the state pension and other benefits.
From 2022/23 the threshold for paying class 2 NIC will be aligned with that for paying Class 4 NIC: £11,908 for 2022/23, then £12,570 for 2023/24. However, this large step up could leave many low-profit traders with no national insurance contributions for many tax years.
To solve this problem from 6 April 2022 self-employed traders with profits below the lower profits limit will be treated as if they had paid class 2 NIC, but in fact they will make no actual NICs payment.
In a sop to small businesses the employment allowance will rise from £4,000 to £5,000 from 6 April 2022. This allowance can only be claimed by employers that had a class 1 NIC liability of no more than £100,000 in the previous tax year. The increase will allow an eligible employer to pay one extra person on the national minimum wage without having to pay employer’s class 1 NIC.
The detail in the Spring Statement also confirmed that the employment allowance will cover the employers’ liability for the Health and Social Care levy.
Basic rate cut
The promised cut in the basic rate of income tax from 20% to 19%, is slated to apply from 6 April 2024, but that is a long way off. As the past month has shown, the world can change significantly in a few weeks, and I wouldn’t like to predict where we will be in the spring of 2024.
In his Mais lecture last month Chancellor Rishi Sunak set out the principles that underpin his tax policy. At the core is a desire to cut taxes, but only where those cuts can be funded, and he restated that belief in his Spring Statement.
To find out how much the tax cuts are all going to cost you need to dig into the Spring Statement 2022 policy costings document. For example, the increases in NIC thresholds to align with the personal allowance will cost £26.345bn over five years to 2026/27.
The costings document sets out three additional sources of income for the Treasury:
The conclusion must be that the next generation will be funding today’s tax cuts by paying handsomely in increased student loan repayments.
Autumn plans
Perhaps further detail on how the tax and NIC cuts will be funded will be revealed in the Autumn Budget. In Sunak’s 12-page Tax Plan was a vague reference to reforming tax reliefs and allowances and an aspiration to make the tax system “simpler, fairer and more efficient”.
A new tax year is starting on April 6th, which will mean many of the changes announced in recent Budgets will come into effect. Before the 2020/2021 tax year kicks off, here’s a roundup of some of the key changes small business.
Changes to some tax and National Insurance rates and bands
Some of the rates and bands have been frozen, while others have increased. Here are the rates and bands that will come into effect on 6th April:
England, Northern Ireland and Wales
2020/21
2019/20
Personal allowance
£12,500
£12,500
Employee’s NI becomes due at
£9,500
£8,632
Employer’s NI becomes due at
£8,788
£8,632
Higher rate tax becomes due at
£50,000
£50,000
Class 2 NI becomes due when profits exceed
£6,475
£6,365
Class 2 NI per week
£3.05
£3.00
Class 4 NI becomes due when profits exceed
£9,500
£8,632
Scottish Tax Rates and Bands
The Scottish rates of income tax will change to the below on 11th May 2020.
2020/21
2019/20
Personal allowance
£0 – £12,500
£0 – £12,500
Starter rate 19%
£12,501 – £14,585
£12,501 – £14,549
Basic rate 20%
£14,586 – £25,158
£14,550 – £24,944
Intermediate rate 21%
£25,159 – £43,430
£24,945 – £43,430
Higher rate 41%
£43,431 – £150,000
£43,431 – £150,000
Top rate 46%
Over £150,000
Over £150,000
Employment Allowance Increased
The Employment Allowance will increase from £3,000 to £4,000 on 6th April but from this date, only businesses with an employer’s NI liability of under £100,000 a year will be eligible to claim the allowance.
National Minimum Wage / National Living Wage rates per hour increased
The following rates will all increase on 6th April:
2020/21
2019/20
Employees aged 25 and over: NLW
£8.72
£8.21
Employees aged under 18: NMW
£4.55
£4.35
Employees aged 18-20: NMW
£6.45
£6.15
Employees aged 21-24: NMW
£8.20
£7.70
Student Loan Income thresholds
The levels of income above which student loan repayments are due will change on 6th April as follows:
2020/21
2019/20
Undergraduate loan: plan 1
£19,390
£18,935
Undergraduate loan: plan 2
£26,575
£25,725
Postgraduate loan
£21,000
£21,000
Working from home rate for employees increased
If any of your clients operate their own limited company and claim costs for working from home, HMRC will ask them for proof of any working from home costs of over £6 (rather than £4) from 6th April 2020.
Changes to the operation of IR35 legislation in the private sector that were due to take effect on 6th April 2020 have now been delayed until April 2021.
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