Tax year end – key considerations and planning tips

As the end of the 2024-25 tax year approaches, individuals and businesses should take advantage of available tax reliefs and prepare for upcoming changes. Here are some of the key areas to focus on:

Furnished holiday lettings: changes from April 2025

From 6 April 2025, the furnished holiday lettings (FHL) regime will be abolished. Currently, FHLs benefit from tax advantages, including full relief on finance costs, capital allowances on furniture and equipment, and CGT and IHT reliefs. However, after this date, they will be treated as standard rental properties, losing these tax benefits.

Actions to consider:

• selling before 6 April 2025 – this may allow you to claim Business Asset Disposal Relief (BADR), reducing CGT to 10% instead of 24%
• if you cannot sell immediately, stopping FHL activities before this date can still enable BADR if sold within three years
• owners should assess whether electing for profit division based on ownership proportions, rather than the standard 50:50, is beneficial
• from April 2025, carried-forward FHL losses will be converted into standard property business losses, making them usable against general rental income
• there are anti-forestalling rules as contracts made between 6 March 2024 and 5 April 2025 will not qualify for previous CGT reliefs if the property is transferred after 5 April 2025.

Non-dom tax regime abolition

From 6 April 2025, the UK’s tax regime for non-UK domiciled individuals (non-doms) will be replaced. The changes will impact taxation on income, gains, inheritance and trusts. The new measure will replace the remittance basis of taxation, which is based on domicile status, with a new tax regime based on residence from 6 April 2025.

The new regime will provide 100% relief on foreign income and gains for new arrivals to the UK in their first four years of tax residence, provided they have not been UK tax resident in any of the 10 consecutive years prior to their arrival (four-year foreign income and gains regime).

Due to these significant changes, it is prudent to plan for the transition by considering restructuring assets or changing residency status where appropriate.

National insurance contributions: filling gaps

To qualify for the full state pension, individuals usually need 35 years of national insurance contributions (NICs). If there are gaps in your record, voluntary contributions may help boost your pension entitlement.

The deadline for filling gaps from 6 April 2006 to 5 April 2018 is extended to 5 April 2025. You can usually make voluntary NIC payments for the past six tax years.

Double-cab pick-ups: changes to tax treatment

From April 2025, HMRC will classify most double-cab pick-ups as cars rather than vans, leading to higher benefit-in-kind (BIK) tax charges and reduced capital allowances.

Key implications for this change include:

• higher BIK costs for employees, increasing Class 1A NICs for employers
• lower capital allowances from April 2025, except for transitional relief available until October 2025
• leasing cost restrictions will limit tax relief on pick-ups emitting over 50g/km CO2.

In order to maximise available tax reliefs, businesses planning to purchase or lease double cab pick-ups should consider doing so before 6 April 2025 to benefit from the current tax treatment.

Business Asset Disposal Relief and Investors’ Relief: claim before changes

Business Asset Disposal Relief (BADR) and Investors’ Relief allow reduced CGT rates on the disposal of business assets or shares in trading companies. However, changes in CGT rates from April 2025 and 2026 will reduce the tax savings. To benefit from the current 10% CGT rate under BADR, taxpayers may consider disposing of assets before 6 April 2025. Anti-forestalling measures apply to share reorganisations and contracts signed between 30 October 2024 and 5 April 2025 if the sale completes after 6 April 2025.

Agricultural Property Relief: expanded scope

From April 2025, Agricultural Property Relief (APR) will extend to land managed under government environmental agreements, increasing IHT relief eligibility. However, not all environmental schemes will qualify, so careful planning is needed. Wider changes to APR and Business Property Relief (BPR) are coming in April 2026, so landowners should plan accordingly.

Salary sacrifice: offsetting NIC increases

From April 2025, the employer NIC threshold will fall from £9,100 to £5,000, and the rate will increase from 13.8% to 15%, leading to higher employment costs. For example, an employer with an employee earning £35,000 per year will see NIC costs rise by £926 from April 2025. View a summary of all employment changes effective from April 2025.

It may be worth considering implementing salary sacrifice schemes (eg pensions, cycle-to-work, electric vehicles) where possible to reduce taxable salaries and offset increased NIC costs.

HMRC late-payment interest increases

From 6 April 2025, interest on unpaid tax will rise by 1.5 percentage points, moving from Bank of England base rate +2.5% to base rate +4%. Hence, late tax payments will become more costly, making it essential to meet deadlines.

Merged R&D scheme takes affect from March 2025

In April last year, the old SME and RDEC schemes merged into a new merged R&D scheme. This new merged scheme will apply for accounting periods starting on or after 1 April 2024 (and therefore accounting periods ending March 2025 onwards).

Under the new scheme, costs related to subcontractors and externally provided workers is only allowable if the work is undertaken in the UK, subject to specific exemptions. Meanwhile, existing RDEC restrictions on claiming subcontracted R&D expenditure will be removed.

Read more on the new R&D merged scheme

Looking ahead: key future tax changes

In addition to the above changes, the following changes are just 12 months away from implementation, ie from April 2026:

• major changes to IHT reliefs (APR and BPR)
• Making Tax Digital (MTD) for income tax to be implemented
• employers must prepare for mandatory payrolling of benefits in kind.