NEWS & VIEWS
With the beginning of the 2025/26 tax year just around the corner, now is a good time to brush up on the forthcoming changes to UK tax rules.
Capital gains tax
The annual exemption amount (AEA) will remain at £3,000 for individuals and estates and £1,500 for trusts in the 2025/26 tax year. This will be the second year the tax-free allowance has stood at £3,000, having been cut each year since 2022/23 as a result of changes made in the 2022 Autumn Statement.
The capital gains tax (CGT) rate for basic rate taxpayers is 18%. For higher and additional rate taxpayers, the rate is 24%.
These rates have applied since 30 October 2024, following Chancellor Rachel Reeves maiden budget, and thus must be taken into account on a 2024/25 tax return. Any gains made between 6 April 2024 and 29 October, 2024 will be taxed at 10% for basic rate taxpayers and 20% for higher and additional rate taxpayers.
The rate of CGT that applies to residential property disposals is 24% for the 2025/25 tax year.
The lifetime limit for business asset disposal relief (BADR) remains at £1 million in the coming tax year. However, any gains from disposals that qualify that for BADR will be taxed at a rate of 14%, up from 10% the previous year. The rate will rise again to 18% from April 2026.
The rates of CGT that apply to carried interest will increase to a flat rate of 32% for all tax bands in the 2025/26 tax year. Prior to the 2024 Autumn Budget, the rate was 18% for basic rate taxpayers and 28% for higher or additional rate taxpayers.
Foreign income and gains
A residence-based regime will apply to the taxation of foreign income and gains (FIG) from the start of the 2025/26 tax year.
New arrivals to the UK, from 6 April 2025, will be able to claim 100% relief on eligible FIG, provided they have not been UK tax resident in the ten years immediately prior to their arrival.
After four years of UK residence, individuals will be subject to UK tax on their FIG.
All former remittance basis users who are not eligible for the four-year FIG regime will pay tax at the same rates as other UK resident individuals on any newly arising FIG.
However, past remittance basis users will, for disposals on or after April 6 2025, be entitled to rebase a personally held foreign asset for CGT purposes to its market value at 5 April 2017. This rebasing is on the condition that the individual was not UK-domiciled or deemed UK-domiciled at any time before tax year 2025/26.
A Temporary Repatriation Facility will also be available for individuals who have previously been taxed on the remittance basis. This will allow individuals to designate amounts derived from previously untaxed and unremitted FIG that arose prior to 6 April 2025, and pay a reduced tax rate.
Designated amounts will be charged at a rate of 12% in the tax years 2025/26 and 2026/27. The rate will rise to 15% in 2027/28.
National Insurance contributions
The rate of class 1, class 1A and class 1B employer National Insurance contributions (NICs) will increase to 15% in the 2025/26 tax year, from 13.8% the year prior.
The Secondary Threshold at which employer NICs are payable will be reduced to £5,000 per year from £9,100.
The Employment Allowance will rise to £10,500 per year from £5,000, and all employers will be able to claim it. Previously, only employers who incurred an employer NICs liability of less than £100,000 were eligible.