The key changes to know for your Self Assessment obligations for the 2025/2026 Tax Year
We know you have just put your self assessment to bed and you are ready to forget about it until later in the year. But being prepared is key for taxation, allowing you to plan for any taxes due and make important decisions about your future.
There are several key changes set to impact individuals’ Self Assessment obligations for the 2025-2026 tax year in the UK that will have an impact on all of us.
1. Increase in the Income Threshold for Filing Self Assessment Tax Returns
HM Revenue & Customs (HMRC) plans to raise the threshold for filing Self Assessment tax returns from £1,000 to £3,000. This change is expected to exempt approximately 300,000 taxpayers from the requirement to file returns, simplifying tax administration for individuals with modest additional income from activities such as selling goods online, freelance work, or content creation. Of those affected, around 90,000 individuals are anticipated to have no tax liability, while others will manage their tax obligations through an online service. This initiative aims to reduce bureaucratic burdens and support entrepreneurial activities.
2. Implementation of Making Tax Digital (MTD) for Income Tax Self Assessment
The UK government is extending its Making Tax Digital (MTD) initiative to Income Tax Self Assessment (ITSA). Starting from April 2026, self-employed individuals and landlords with annual income exceeding £50,000 will be required to:
- Maintain digital records of their income and expenses.
- Provide quarterly updates to HMRC using MTD-compatible software.
This transition aims to reduce errors and streamline the tax reporting process. Those with annual income between £30,000 and £50,000 will need to comply with these requirements from April 2027. The threshold is reduced even further to £20,000 from April 2028.
3. Changes to Vehicle Excise Duty (VED) Affecting Electric and Low-Emission Vehicles
From April 1, 2025, new laws will introduce changes to Vehicle Excise Duty (VED):
- Electric Vehicles: Drivers of electric, zero, and low-emission vehicles will be required to pay car tax for the first time. The first-year tax for newly registered vehicles will be £10, increasing to £195 annually from the second year onwards. Vehicles registered prior to April 1, 2025, will also see tax adjustments based on their registration dates.
- Hybrid Vehicles: Hybrid vehicles will lose their previous £10 discount and will be taxed at £195.
- Expensive Car Supplement: Electric vehicles costing more than £40,000 will incur a £425 “Expensive Car Supplement.”
- Benefit-in-Kind (BiK) Tax: The BiK tax for electric vehicles will increase from 2% to 3% on April 6, 2025, and will continue to rise until the 2029/30 tax year.
These changes reflect the government’s efforts to adapt tax policies in response to the growing adoption of electric and low-emission vehicles.
4. Detailed Reporting Requirements for Self Assessment
Beginning in the 2025/2026 tax year, HMRC will require additional information via Self Assessment tax returns and real-time payroll returns, including:
- Detailed reporting of employee hours through real-time Pay As You Earn (PAYE) reporting.
- Separate reporting of dividend income and shareholding for shareholders in owner-managed businesses.
- These measures aim to enhance transparency and accuracy in tax reporting.
5. Changes to Employer National Insurance Contributions
From April 6, 2025, the employer secondary Class 1 National Insurance contributions rate will increase from 13.8% to 15%. This change also affects Class 1A and 1B National Insurance contributions on expenses and benefits provided to employees. Additionally, the Secondary Threshold, which is the point at which employers start to pay employer National Insurance contributions on an employee’s salary, is decreasing from £9,100 to £5,000 per year. Employers with staff earning £5,000 a year or more will need to pay employer National Insurance contributions and report payments to HMRC.
These developments underscore the importance for individuals and businesses to stay informed about upcoming changes to the Self Assessment system and related tax obligations to ensure compliance and optimise financial planning.
If you have any queries or need to know more about the impact of these changes to you contact us on hello@jarem.co.uk
