Small business tax changes: new thresholds, rates, and allowances

What are the latest tax changes the self-employed and small businesses need to know about? There are usually new UK tax brackets and other updates introduced each year, often coming into force at the start of the new financial year in April.

So here are seven business tax changes to understand, from income tax brackets and national living wage increases to Making Tax Digital and business rates changes.

7 tax changes small businesses need to know

The new tax year starts on 6 April every year, and with that often comes a range of new tax rates and thresholds. Here’s a summary of the latest tax changes for 2024-25 and 2025-26:

1. Personal allowance freeze extended

As part of the 2025 Autumn Budget, the Chancellor announced that the personal allowance will remain frozen at £12,570 until 2031.

As a reminder, this is how much you can earn tax free.

Businesses and taxpayers in general are facing rising costs, so could feel the pinch of this personal allowance freeze.

And over the long-term, if earnings rise and the personal allowance stays the same, then you’ll pay more in tax.

2. UK tax brackets for income tax

These are the income tax rates and thresholds the self-employed should be aware of:

• basic rate – 20 per cent on income between £12,571 and £50,270 – you pay tax on £37,700
• higher rate – 40 per cent on income between £50,271 and £125,140
• additional rate – 45 per cent on income above £125,140

There are different bands and rates for Scotland.

3. Changes to wage rates for employers

As part of the Autumn Budget 2025, Chancellor Rachel Reeves announced a range of changes to the wage rates paid by employers.

It’s estimated that the new national living wage will see approximately 2.4 million workers benefit from a £900 annual pay rise.

The government’s eventual aim is to have a single adult rate national living wage.

While this is good news for workers, this increase also means higher costs for employers.

4. Tax rates for dividends

The dividend tax rate will increase by two per cent from the 2026-27 tax year. This change will affect both basic and higher rate taxpayers.

The dividend allowance was cut from £1,000 to £500 from the 2024-25 tax year onwards. This means you pay dividend tax on the dividends you earn above £500 at these rates:

5. Making Tax Digital on track for April 2026

Self Assessment taxpayers have until April 2026 to start using Making Tax Digital (MTD) for income tax. Initially this will apply to those with an income over £50,000. Those earning over £30,000 will need to use the system from April 2027.

An update during the 2025 Autumn Budget revealed that MTD penalties for income tax won’t be applied for late submission of quarterly updates during the 2026-27 tax year.

6. Changes to business rates

Retail, hospitality, and leisure (RHL) businesses should be aware of the latest business rates changes – a new ‘permanent’ lower rate.

These rates will be 5p lower than the national multipliers:

• small business RHL multiplier: 38.2p in 2026-27
• standard RHL multiplier: 43p in 2026-27

RHL business losing relief will also benefit from an expanded supporting small business scheme, which will apply from 1 April 2026 and last for three years.

For other businesses, a new transitional relief package has been introduced to protect businesses from high bill increases. 

You can estimate your business rates using the government’s online calculator. There are different rates for businesses with premises in Scotland and Northern Ireland.

7. Dual PAYE and self-employed income payments

Those with income from both pay as you earn (PAYE) and self-employed means should expect a further update on how they report tax through Self Assessment.

The government is currently consulting on how to encourage more timely payments, aimed at paying income tax the same year it was earned.

While a consultation will be published in early 2026, any changes won’t be implemented until April 2029.

Other UK tax changes to look out for

• investing in real-time digital prompts within VAT filing software from April 2027, and corporation tax filing software from April 2028
• the plastic packaging tax rate for 2026-27 will increase in line with inflation to incentivise businesses to use recycled plastic rather than new plastic
• fuel duty will be frozen at its current rate until September 2026
•  a new mileage charge for people driving electric vehicles from April 2028
• pre-packaged milk-based drinks with added sugar will be included in the soft drink industry levy from 1 January 2028

Please use this article as a guide and get professional tax advice on self-employed tax brackets if you’re not sure about anything.

Small business guides and resources

• How to do your Self Assessment tax return
• What is HMRC’s Time to Pay service?
• Do you have to pay tax on cryptocurrency?
• What type of business insurance do I need?

Photograph: Andrey Popov/stock.adobe.com