Changes already in place
Changes already in the system…
Self Employed Taxpayers class 2 and class 4 NI rates changes.
From 2024 25 if your taxable profit is above £6,725 then you do not need to pay class 2 NI (£ 179.40p) and will still get a year’s State Pension contribution.
Also, from 2024 25 class 4 NI (paid on profits between £12,570 and £50,270) has been reduced from 9% to 6%. Above £20,270 the rate remains at 2%.
Employed class 1 NI rates changes.
From 2024 25 the employee Class 1 NI rate has been reduced to 8%.
From 2025 26 the employer NI rate has been increased from 13.8% to 15% and the threshold for paying this reduced for £9,100 to £5,000 annual salary. This has been partially offset by increasing Employers Allowance.
These changes to class 1, class 2 and class 4 NI can affect a decision whether to keep as a self-employed or move to a limited company.
Foreign Income
It used to be the case that some foreign income was only taxed when money was brought into the UK (called the Remittance Basis). From 6 April 2025 this ceased to be the case and all foreign income has to be declared (the 2025 26 tax year).
Response time from HMRC
Under previous governments the staff numbers at HMRC have been significantly reduced partly because of anticipated savings from Making Tax Digital (MTD), but while the MTD implementation has been delayed the manpower reduction hasn’t. In addition, there has been a series of “rolling strikes” at HMRC which has made matters worse. This has affected HMRC response times.
Current HMRC repose times are reflected by the following examples…
- A colleague who claimed a CIS refund on 20 September 2025 has been told by HMRC to expected this to be processed in January 2027;
- Another colleague who sent HMRC a letter regarding PAYE on 7th April 2025 has been advised that a reply should be sent out by the 4th April 2026;
Furnished Holiday Lettings (FHL)
For 2025 26 tax year Furnish Holiday Lettings rules cease to apply for both Income tax and Capital Gains Tax. Income and costs will be treated in the same way as all other property income.
Shareholders in Owner Managed Businesses
For 2025 26 tax year shareholders who receive dividends from close companies (this is a privately owned limited company controlled by five or fewer people) will now be required to provide the amount of Dividend income received for the close company in the Employment Section of the tax return.
Winter Fuel Payment Charge
For 2025 26 tax year Pensioners who received a Winter Fuel Payment and have income over £35,000 will have the payment reclaimed by HMRC normally through their tax return.