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With Trump’s Tariff Turmoil causing chaos and confusion within stock and bond markets of late, it’s easy to forget we entered a new tax year not long ago. I thought it worth highlighting some of the changes made.

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National Insurance

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There was a 1.2% increase in the NI rates for employers taking the rate from 13.8% to 15%. On top of this, the level at which employers now have to pay the tax on employee’s earnings has reduced from £9,100 per year to £5,000. Some employers can apply for a little relief from these hikes as the “employment allowance” has increased from £5,000 to £10,500 but this only really helps small businesses with few employees and low salary costs. Giving with one hand and taking from another - one wonders why HMRC have to make things so complicated in the first place. I’ve always advocated a simple flat rate of tax and a reduction in reliefs.

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Salary sacrifice can mitigate the increase in NI by reducing an employee’s salary and increasing their pension benefits instead. It also works for those parents teetering on the £100,000 salary cliff edge. Once your income goes above this level you start to lose your personal allowance and some Government support for childcare. A word of caution however – a lower salary can affect the amount you can borrow for mortgage purposes, reduce life cover amounts offered by your employer and may result in lower Maternity and Paternity pay.

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The resultant impact is huge. Tesco is reported to be facing an extra £1 billion in cost with the increases in the minimum wage and employer’s NI over the next four years.  Either unemployment and redundancy will increase, pay rises reduce or the cost will be passed onto consumers which will either create higher inflation or a reduction in corporate profits if consumers tighten their belts.

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Business Asset Disposal Relief

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This is the new name of what was Entrepreneur’s Relief, but I assume someone didn’t like the word entrepreneur. There was a time once when private individuals were encouraged to take risks which made sense as it is the private sector that generates wealth, not the public sector. On the sale of a qualifying business before 11th March 2020, the rate of Capital Gains Tax was reduced to just 10% and on the first £10 million of realised value, to acknowledge the risks that entrepreneurs made. It was, extraordinarily, the Conservatives, the perceived party of low tax, that decided that this relief should be limited to just £1 million. Now the current Government has put a further nail in the coffin of entrepreneurs by increasing the tax rate to 14% from 6th April 2025 and this will rise again to 18% on 6th April 2026. Above this, tax at the new higher rate of 24% will apply.

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Don’t forget it was the same Conservatives that increased Corporation Tax from 19% to 25% in April 2023. Bizarrely it was Jeremy Hunt who presided over this rise yet recently encouraged Sir Keir Starmer to turn Britain into a low tax  “Singapore-on-Thames". He has just been Knighted. To think it was not long ago that earlier legislation was in place to reduce corporation tax to 17%.

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Non-UK Domiciles

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The old Remittance Basis rules have been abolished and switched to a new system based on Tax Residence. Tax on worldwide income will now be assessed, rather than on just that income that had been remitted to the UK.  Further, if someone is UK Resident for Income Tax purposes for 10 of those 20 years, Inheritance Tax will apply to their worldwide assets. It's hard to see the attraction.

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Business Property Relief and Agricultural Relief

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Not to be confused by Business Asset Disposal Relief, (above), this refers to Inheritance Tax. BPR was introduced in 1976 to allow family businesses to be passed down through the generations without needing to be broken up and sold to pay an inheritance tax bill. It recognised the efforts and risks once again taken by entrepreneurs and the benefits that the creation of a business gave in the employment of staff. How could breaking up a business benefit anyone? The short-term tax gain made by the Revenue is nothing compared to the revenue they could raise if the business continued.

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And so now privately owned businesses and farms will need to find the money to meet a 20% tax bill on any business value in excess of £1 million, although this works out at £2 million for a couple. This new rule comes into effect on 6th April 2026, not that this provides much comfort.

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This really affects those who wish to pass on their firms and farms to the next generation, rather than those who are likely to sell their businesses, as by doing so those assets would no longer qualify for relief and would become liable to IHT anyway.

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But there are ways to plan for and indeed mitigate the tax. It is still possible to transfer shares using business relief into discretionary trusts, without limit. The difference is that whereas the transferred assts were immediately exempt of IHT under the old rules, now the transferor must survive 7 years for the gift to be exempt. Forward planning and life assurance should be considered for added protection.

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Family Investment Companies

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Family Investment Companies are very much in vogue as this allows parents to cap the value of any business asset, allowing all future growth to be immediately exempt of IHT whilst allowing the parents to continue to control the company business and to benefit.

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I finish with the words of Jon Moynihan from his excellent duo of books about restoring growth to the UK. “Without growth, the deeply embedded and unalterable human aspiration to thrive and be free cannot be universally fulfilled. Growth is necessary because if striving results in no reward, aspiration withers and dies.”

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Comments from James Scott-Hopkins, Founder, EXE Capital Management.

Facts and figures taken from HMRC updates and Harbour Key Accountants update: https://www.harbourkey.com/blogs/articles/happy-tax-new-year

The views are those of the author only. The value of investments can fall as well as rise. Past performance is no guarantee of future returns.

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