Small business tax in the UK: what you need to know in 2025
21/05/2025
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Taxes can be confusing — especially for small business owners trying to juggle day-to-day operations. With constant updates to tax codes, deadlines, and reporting systems, it’s more important than ever to stay informed. This simple guide breaks down the most important small business tax changes in 2025, with tables to make everything easier to understand.
Whether you’re a sole trader, limited company, or just starting out — this is everything you need to know, in one place.
What’s new in 2025?
The UK tax system has seen some key updates that could impact your business — especially if you’re earning dividends, close to the VAT threshold, or late with your filing.
Key 2025 tax updates
| Tax area | What’s changed | Who’s affected |
|---|---|---|
| Corporation Tax | Still 25% for profits over £250K, but stays at 19% for those under £50K | Limited companies |
| Dividend Allowance | Reduced from £1,000 to just £500 | Shareholders and directors |
| VAT Threshold | Increased to £90,000 | Businesses approaching VAT registration |
| Late Penalties | £200 initial fine + daily penalties for late filing | Anyone who misses Self Assessment or company deadlines |
Why it matters: These changes could affect how much you pay or when you need to take action. Ignoring them could result in fines or overpaid tax.
What Small business tax apply to you?
Different structures = different tax obligations. This table shows you what you might need to pay, based on your business setup.
Common taxes by business type
| Business type | Corporation tax | Income tax | VAT | National insurance | Business rates |
|---|---|---|---|---|---|
| Sole Trader | ❌ | ✅ | If over £90K | ✅ (Class 2 & 4) | Sometimes |
| Limited Company | ✅ | ❌ (on profits) | If over £90K | ✅ (Class 1 employer/employee) | Sometimes |
| Partnership | ❌ | ✅ (split profits) | If over £90K | ✅ | Sometimes |
Tip: Not sure which taxes apply? A free discovery call with an accountant can help.
Making tax digital (MTD) — what you must do
HMRC is moving tax online. If you haven’t already, now is the time to understand Making Tax Digital and what it means for your business.
Key MTD Deadlines
| Deadline | Who it affects | What you must do |
|---|---|---|
| Already active | VAT-registered businesses | Use MTD-approved software to submit VAT returns |
| April 2026 | Sole traders & landlords with £50K+ income | MTD for Income Tax becomes mandatory |
Why it matters: MTD isn’t just about software — it changes how you keep records, submit returns, and stay compliant.
Recommended tools:
- Xero
- QuickBooks
- FreeAgent
Ready to simplify your taxes in 2025?
Stay on Top of VAT Deadlines in 2025
VAT compliance isn’t just about submitting returns — it’s about staying organised, meeting deadlines, and avoiding costly penalties. We’ve created a free, easy-to-follow VAT checklist that outlines the key deadlines for the rest of the year, plus helpful reminders for keeping your digital records in order.
Key VAT Deadlines & Reminders (from April 2025)
| Due Date | Task |
|---|---|
| 7th August 2025 | Submit Q2 VAT Return (Apr–Jun) |
| 1st October 2025 | Begin prep for Q4 VAT period |
| 7th November 2025 | Submit Q3 VAT Return (Jul–Sep) |
| Ongoing | Maintain digital records and reconcile transactions |
Tax-saving tips that actually work
The UK tax system allows for smart planning. These common strategies can save you hundreds — or even thousands — when used correctly.
Practical tax-saving ideas
| Tip | How it helps |
|---|---|
| Claim all expenses | Lowers your taxable profit (includes home office, mileage, phone) |
| Use Annual Investment Allowance | Deduct cost of new equipment or software |
| Contribute to pensions | Director or employer pension contributions reduce tax |
| Balance salary & dividends | More efficient way to take income from a limited company |
Example: Spending £2,000 on a laptop for your business? That’s a deductible expense — and may reduce your Corporation Tax bill by up to £380.
Why use a small business accountant?
Taxes are one thing — running a business is another. A professional accountant ensures you stay compliant and save money.
The value of an accountant
| DIY tax | With an accountant |
|---|---|
| Risk of penalties | Returns filed on time |
| Missed savings | Maximum deductions claimed |
| Confusion & stress | Clear advice and guidance |
| Outdated records | Real-time software integration |
“I didn’t realise how much I was overpaying in tax until I spoke to someone.”
— Real feedback from a Fusion client
Conclusion
Taxes don’t have to be scary. By understanding what’s new in 2025, using digital tools, and working with the right support, you can run your business smarter — and keep more of what you earn.
Need help getting started?
Book a free consultation with Fusion Accountants – Experts in small business tax
