The Tax Landscape Is Changing: What Businesses Need to Prepare for Now (2025–2027)

As we look ahead to the 2025/26 tax year and beyond, one thing is very clear: the UK tax system is moving firmly towards mandatory digital compliance, higher employment costs, and tighter reliefs.

The biggest shift of all?
We are moving away from annual, retrospective reporting and into a world of real-time and quarterly reporting.

Here are the key changes businesses should be aware of right now, and what they can do to prepare.

1. Making Tax Digital (MTD) for Income Tax – From April 2026

This is one of the most significant changes to the UK tax system in decades.

Who does this affect?
Sole traders and landlords with a combined qualifying income (gross turnover) of over £50,000.

What’s changing?
From 6 April 2026, affected taxpayers must:

• Keep digital records (paper ledgers and spreadsheets will no longer be sufficient)
• Submit quarterly updates to HMRC, rather than one annual return

What should you do now?

• Move onto MTD-compatible accounting software
• Start getting comfortable with quarterly reporting well before the deadline

Early preparation will significantly reduce stress when MTD becomes mandatory.

2. Rising Employer Costs & Payroll Changes

Employment costs are increasing, and businesses with staff need to budget carefully.

Employer National Insurance

• From 6 April 2025, Employer NICs increase from 13.8% to 15%
• The secondary threshold drops from £9,100 to £5,000 (until April 2028), meaning employers start paying NICs much sooner

Employment Allowance

• Increases to £10,500, which helps offset some of the rise, but many businesses will still see higher payroll costs overall

Statutory Sick Pay (SSP)

• From 1 April 2026, SSP is expected to:
  
  • Be payable from day one of absence
  • Apply to all employees, with the Lower Earnings Limit removed

This is a significant change for small employers and should be factored into cashflow planning.

3. Personal Tax & Dividend Changes (From 2026/27)

For directors and higher earners, personal tax planning is becoming even more important.

Dividend Tax Increase

• From 6 April 2026, dividend tax rates rise by 2 percentage points
  • Standard rate increases from 8.75% to 10.75%

Frozen Tax Thresholds (Fiscal Drag)

• Income tax thresholds are frozen until 2031
• As wages rise, more income is pulled into higher tax bands, increasing tax bills without any rate changes
  

High Income Child Benefit & Personal Allowance

• Once income exceeds £100,000, the personal allowance is withdrawn

This creates an effective 62% tax rate, making pension contributions a key planning tool

 

4. Capital Gains Tax & Business Disposals

If you’re thinking about selling a business or assets, timing matters.

Business Asset Disposal Relief (BADR)

• The CGT rate on qualifying disposals increases to 18% from 6 April 2026
• Until then, the rate remains at 14%

Planning opportunity:
If an exit or asset sale is on the horizon, reviewing the timing could lead to meaningful tax savings.

 

5. Other Key Changes to Be Aware Of

• Capital Allowances: From 1 April 2026, the main writing-down allowance reduces from 18% to 14%
• Furnished Holiday Lettings: Special tax rules are abolished from 6 April 2025
• Companies House Fees: Increased from 1 February 2026 (digital incorporation up to £100)

Minimum Wage: From 1 April 2026, the National Living Wage for those aged 21+ rises to £12.71 per hour

 

A Simple Checklist for Business Owners

If you’re unsure where to start, focus on these five areas:

1. Go digital – Especially if income is approaching or over £50,000
2. Budget for higher NICs – 15% Employer NICs and lower thresholds add up
3. Review profit extraction – Salary vs dividends may need rebalancing
4. Prepare for quarterly reporting – Move away from annual “once a year” reviews
5. Plan exits early – Business sales before April 2026 may be more tax efficient