As 2025 unfolds, small and medium-sized enterprises (SMEs) will need to adapt to tax changes that could significantly impact their operations. Understanding these updates is crucial to ensure compliance and optimise financial strategy. We’re here to help you stay in the know for the upcoming tax changes.
Key Law Tax Updates for 2025
The government announced several key changes to tax regulations in 2025. Here’s a summary of the most significant updates:
- Employment Taxes: Reduction in the National Insurance thresholds and an increase in the Employer contributions will have a significant impact on cash flow and put a strain on profit margins. Increases to the National Living Wage may also compound the impact for Employers.
- Capital Gains Tax: This is a tax that impacts business owners and the self-employed, which was targeted by the new government in their first budget in October 2024. Capital Gains Tax rates were increased from the date of this budget, with further changes, reducing the benefit of Business Asset Disposal Relief by 4%from April 2025 and a further 4% from April 2026.
- Company Cars: Whether a vehicle is considered to be a van or a car may seem trivial but can have a significant tax impact. Double Cab Pickup Trucks have been the topic of discussion for some time, with the new Government changing the classification of this vehicle once more. From April 2025, these will now be deemed cars for Corporation Tax and Income Tax purposes, meaning the reliefs available to Employers and Employees will be significantly reduced.
- Corporation Tax: The tiered structure introduced in previous years will continue. Businesses with profits under £50,000 still benefit from the small profits rate, then paying an effective rate of tax of 26.5% on profits between £50,000 to £250,000, with the full rate being 25% for profits above £250,000.
- Research and Development: The previously announced merger of the SME R&D Scheme and the RDEC scheme came into effect from 1 April 2024 and will therefore impact accounting periods ending from 31 March 2025.
- Sector-Specific Incentives: Retail, tech, and construction sectors are benefiting from targeted tax reliefs, but these opportunities require careful planning to take full advantage.
Connect with Ollie Squire on LinkedIn, one of 4 new partners at The MGroup:
I’ve been with The MGroup for almost a decade and have built strong relationships with many of our clients. This familiarity helps me to understand their unique requirements and provide the support they need.
Practical Advice for Managing 2025 Tax Changes
Navigating these changes doesn’t have to be daunting. With the right support and proactive measures, you can minimise liabilities and stay ahead of the curve. Here’s how:
Filing Returns
- Stay Organised: Ensure all records are up-to-date, including receipts, invoices, and employee expenses. Cloud-based accounting systems can help simplify this process.
- Seek Expert Support: Partnering with experienced business tax accountants ensures your returns are accurate and timely. The MGroup’s tax advisors are well-versed in 2025’s changes and can help you avoid common pitfalls.
VAT Management
- Review Thresholds: If your turnover is nearing the VAT threshold, consider the implications of crossing it. The right strategy can mitigate financial surprises.
- Digital Compliance: Invest in reliable MTD software to handle VAT submissions efficiently and remain compliant.
Maximising Deductions
- Know What You Can Claim: From office equipment to business mileage, many deductions are often overlooked. A tax advisor can help identify all eligible claims.
- Plan Investments Strategically: Timing major purchases or investments to align with tax years can maximise your reliefs.
Industry-Specific Tax Planning Tips
Different sectors face unique challenges and opportunities when it comes to tax planning. Here are tailored suggestions for three prominent industries:
Retail
- Stock Management: Keep accurate inventory records to claim deductions for unsold stock and minimise waste-related losses.
- VAT Schemes: Explore schemes like the Flat Rate Scheme or the Retail Export Scheme if applicable to your business.
Tech Startups
- R&D Tax Credits: Claim relief for research and development activities, even if your projects are in early stages.
- Equity and Share Options: Work with a tax advisor to structure employee share schemes tax-efficiently.
Construction
- CIS Compliance: Stay on top of Construction Industry Scheme (CIS) deductions to avoid penalties.
- Capital Allowances: You can claim allowances on equipment, vehicles, and even some building projects.
Connect with Wendy Tatham on LinkedIn, one of 4 new partners at The MGroup:
I specialise in Charities and Personal Tax, and with over a decade of experience, I take pride in helping clients navigate complex tax matters with clarity and confidence. Building trust and providing tailored support are at the heart of everything I do.
‘The MGroup is delighted to announce the appointment of four new Partners, effective August 1st 2024, strengthening our commitment to providing a holistic, partner-led service to all our clients.’ Read the full news story here.
Why Work with The MGroup?
With over 95 years of experience serving businesses in Oxfordshire, The MGroup is your trusted partner for all things tax. Our team of expert business tax accountants offers personalised tax planning advice to ensure your business thrives amid regulatory changes.
Connect with The MGroup Today
- Contact Us: Get in touch with The MGroup’s tax advisors to discuss your business’s unique needs.
- Connect with one of our Partners: Ollie or Wendy on LinkedIn for insights and updates on financial best practices.
- Visit Oxford City FC: Experience the energy of Oxford City FC at ‘The MGroup Stadium.’ Join us for The Business Club’s which feature throughout the season. It is a great opportunity to network and connect with local businesses.
Tax planning isn’t just about compliance; it’s about creating opportunities for growth. By understanding the current changes and seeking professional tax advice in Oxford, your SME can confidently navigate 2025 and beyond. Partner with The MGroup for expert guidance tailored to your business and industry.