What’s New in UK Tax for 2025?
Keeping up with UK tax rules is no small task, especially in a fast-paced city like London, where individuals, landlords, and businesses are constantly adapting to economic shifts. With tax changes in 2025 UK now taking effect, many are driven by HMRC updates, the Spring Budget, and prior autumn announcements. Understanding what’s changing and how it could affect you is crucial.
From personal allowances and business taxation to the upcoming digital tax reporting requirements and significant non-dom rule changes, here’s a practical London tax update to help you stay informed and financially prepared.
Personal Tax: Key Updates for Employees and the Self-Employed
- Frozen Personal Allowance: The personal tax changes UK has brought in 2025 include a continued freeze in the personal allowance at £12,570 until April 2028. While the rate hasn’t increased, your tax bill might, because as salaries rise with inflation, more income slips into higher tax brackets.
- No Change to Income Tax Bands: The income tax thresholds haven’t changed, but the frozen allowance effectively increases your taxable income over time. It’s a quiet but steady increase in the overall tax burden.
- National Insurance Changes: Class 2 NICs were abolished for the self-employed in April 2024, simplifying filings for sole traders. However, Class 4 NICs are still payable at:
- 8% on profits between £12,570 and £50,270
- 2% on profits above £50,270
These tax changes in 2025 UK will still affect 2025 filings, especially for freelancers and self-employed individuals in London.
- Dividend & Capital Gains Allowance Cuts: Both allowances have dropped significantly:
- Dividend Allowance is now £500 (was £1,000 in 2023–24)
- Capital Gains Tax Exempt Amount is now £3,000 (was £6,000 in 2023–24)
If you receive dividend income or plan to sell investments or property in 2025, these changes could impact your personal tax liability.
Making Tax Digital (MTD): What’s Expected in 2025?
- For Sole Traders and Landlords: Although mandatory rollout for Making Tax Digital for Income Tax (MTD ITSA) starts in April 2026 (for those earning over £30,000), 2025 is your setup year. HMRC encourages eligible individuals, especially landlords and sole traders, to start digitizing their records and trialing submission systems through approved software.
- For VAT-Registered Businesses: MTD for VAT is already mandatory for all VAT-registered businesses, regardless of turnover. You must continue using HMRC-approved software for record-keeping and VAT submissions.
If you’re a London-based SME, these Making Tax Digital 2025 preparations are essential for compliance and business continuity.
Business and Corporation Tax: What Companies Should Note?
- Corporation Tax Rates (Still Tiered)
- 19% on profits up to £50,000
- 25% on profits above £250,000
- Marginal Relief applies in between
These corporation tax London thresholds mean small businesses must be proactive in assessing profit margins to avoid unnecessary tax burdens.
- Capital Allowances: Full Expensing Continues
Businesses can still fully expense new plant and machinery investments, great for those planning expansion in 2025. Always verify the latest HMRC rules when budgeting for capital expenditure.
- Watch for R&D and SME Relief Updates
R&D tax credits and small business reliefs often change post-Autumn Statement, so stay tuned for any final 2025 updates that may impact tech firms or innovative startups.
- Business Rates Revaluation
The revaluation of commercial properties continues to affect business rates in London. Ensure your assessments are up to date, as this remains a core issue in the broader London tax update landscape.
Property Taxes: What London Landlords and Homeowners Should Know?
- SDLT Holiday Is Over: As of March 2025, the temporary Stamp Duty Land Tax (SDLT) holiday has ended. Standard SDLT rates now apply to all property transactions, significant for both homeowners and investors in London’s active property market.
- CGT on Residential Property: With the CGT exempt amount now reduced to £3,000 and a 60-day deadline for reporting sales, sellers of residential property must act quickly and carefully to remain compliant.
- Digital Reporting for Landlords: Landlords earning over £30,000 annually should begin preparing for Making Tax Digital 2025. Transitioning to digital systems now will ease the process ahead of the 2026 requirement.
- Non-Resident Landlord Scheme (NRLS): If you’re a non-resident renting out property in London, you must report rental income and pay UK tax through HMRC’s NRL Scheme. Proper filing and digital compliance are critical to avoid penalties.
Big Changes for Non-Domiciled Residents
April 2025 introduced a major overhaul in the UK’s treatment of non-doms:
- The Remittance Basis is Gone: You can no longer opt to be taxed only on UK income unless foreign income is brought into the UK.
- New Residents Get a Break: First-time UK residents (after 10 years abroad) enjoy a 4-year exemption from UK tax on foreign income and gains.
- Existing Non-Doms Must Act Now: Those already in the UK must now report and pay UK tax on worldwide income unless transitional relief applies.
These tax changes in 2025 UK have massive implications for high-net-worth individuals and expats in London, and professional planning is essential.
Why Does This Matter? Especially in London
- Digital Tax is Here to Stay: With so many sole traders, startups, and landlords, making Tax Digital 2025 preparations must begin now.
- London Property Under Pressure: Stamp Duty, CGT, and rental income rules continue to tighten, especially for overseas owners.
- Non-Dom Residency and Wealth Planning: With changes to the non-dom regime, it’s time to revisit global income planning and offshore structures.
How Can Our London Tax Advisors Help You in 2025?
Understanding and adapting to these London tax updates is essential for staying compliant and avoiding costly surprises.
At Harvey Craig, our tax specialists offer tailored support for:
- Managing personal tax changes UK across employment, investments, and property
- Helping landlords and sole traders prepare for Making Tax Digital 2025
- Advising companies on corporation tax, London rules, and R&D reliefs
- Assisting non-doms with residency strategy, compliance, and transitional relief
Need help navigating the latest tax changes 2025 UK? Contact our expert team for proactive, London focused tax services today.