A WIDE package of tax reforms has come into force across the UK, introducing significant changes for individuals, businesses and investors.
The measures, effective from April 6, are expected to affect millions of taxpayers and reshape key aspects of financial planning, compliance and reporting.
Filip Filev, senior tax advisor at Lera Accountancy in Worcester, said: “With these changes now in force, early planning is essential.
Filip Filev, senior tax advisor at Lera Accountancy in Worcester (Image: Lera Accountancy)
“Individuals, landlords and business owners should take proactive steps to ensure they remain compliant and financially efficient.
“Whether it’s getting set up for Making Tax Digital, rethinking how income is taken or making use of reliefs like EIS (Enterprise Investment Scheme) and VCTs (UK Venture Capital Trust), early planning can make a significant difference and tax savings.
“Self-employed individuals earning above £50,000 and affected by Making Tax Digital should begin using compatible software as soon as possible such as Xero or Quickbooks.
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“Transitioning early will help avoid last-minute disruption and ensure smooth quarterly reporting while keeping compliant with HMRC guidance.
“With increases to dividend and capital gains tax, it may be beneficial to reassess how income is taken particularly for company directors and investors such as dividend timings.
“Professional advice can help optimise tax efficiency.
“The new inheritance tax caps of £2.5 million on business and agricultural reliefs mean existing plans may no longer be effective.
“Individuals with significant assets should consider updated valuations and restructuring where appropriate to avoid future tax liability.
“Despite tightening in some areas, expanded schemes such as EIS and VCTs still offer opportunities.
“Individuals may consider allocating part of their portfolio to EIS or VCT investments which still offer income tax relief even as other tax rates rise.
“Understanding what reliefs remain available can help offset rising tax liabilities.
“Given the scale and complexity of the reforms, tailored advice from tax professionals can help identify risks, opportunities and compliance requirements before deadlines approach.”
A central feature of the reforms is the phased introduction of the Making Tax Digital for Income Tax programme.
From April self-employed individuals and landlords earning over £50,000 annually must maintain digital records and submit quarterly updates using compatible software.
The scheme will expand to those earning over £30,000 in 2027 and £20,000 by 2028, ultimately impacting an estimated 2.9 million taxpayers.
Inheritance tax rules have also been tightened.
For the first time family businesses and agricultural assets will face capped reliefs with a combined limit of £2.5 million per individual.
Assets exceeding this threshold will receive reduced relief, resulting in an effective 20 per cent tax rate on the excess.
The changes are expected to increase demand for estate planning and professional valuations.
Dividend taxation has risen, with the basic and higher rates increasing to 10.75 and 35.75 per cent respectively.
Meanwhile, capital gains tax on qualifying business disposals has increased to 18 per cent and carried interest will now be taxed as income rather than capital gains, aligning the UK more closely with international standards.
Households will face broader cost increases, including higher council tax rates across all UK regions and a rise in Vehicle Excise Duty.
Air Passenger Duty has also increased by up to 15 per cent with a sharper rise for private jet travel.
In contrast, some measures offer targeted relief.
New exemptions for minor employee benefits, including reimbursed expenses and health-related provisions, have been introduced. Investment schemes such as the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs) have expanded eligibility thresholds, although VCT tax relief has been reduced.
Other changes include the removal of tax relief for homeworking expenses and stricter rules governing inheritance tax relief on charitable donations, now limited to UK-registered organisations.