Business Tax Changes in 2025/26: Higher Costs, Fading Reliefs, and Smart Planning Opportunities

From April 2025, UK businesses will face a mixed tax landscape. While the headline Corporation Tax rates remain unchanged, rising business rates, changes to capital allowances, and expiring COVID-era reliefs mean higher running costs and tighter margins for many.

At the same time, sector-specific incentives and investment reliefs still offer smart opportunities — if used correctly.

Here’s a breakdown of what’s changing, who it affects, and how Merranti can help you adapt.

Business Rates Relief: The End of COVID Support

One of the most widely used reliefs for high street businesses is winding down.

What’s changing?

• The temporary 75% business rates relief for Retail, Hospitality and Leisure (RHL) sectors ends on 31 March 2025

• From April 2025, a reduced 40% relief will be introduced — capped at £110,000 per business

This cap means larger retail and hospitality groups, or those with multiple properties, will see their rates bills increase significantly.

Future permanent reform

From 2026/27, the government plans to introduce permanently lower business rate multipliers for RHL properties with rateable values under £500,000.

• Properties over this threshold will be taxed at a higher multiplier

• This is likely to target large online retailers and distribution warehouses, many of which saw increased profits during COVID while paying lower rates

Tip: If you own or lease RHL property, now’s the time to review your rates exposure and plan ahead for 2025’s cap — especially if you’re near the £110,000 limit.

Business Rates Multipliers: 2025/26 Update

• Small business multiplier will remain frozen at 49.9p

• Standard multiplier will increase with inflation to 55.5p

This means many medium to large businesses will face higher bills, even if their rateable value hasn’t changed.

Full Expensing Continues: A Major Relief for Equipment Investment

The 100% “full expensing” capital allowance for new and unused plant and machinery, introduced in 2023, remains in place.

• Applies to companies (not sole traders)

• Covers most main pool assets

• Gives 100% tax relief in the year of purchase

Key exclusions:

• Leased-out assets (e.g. plant bought to hire to others)

• Used or second-hand assets

• Businesses not trading as limited companies

There’s no set end date for this scheme, but the government has warned it may be withdrawn “when fiscal conditions allow” — so it’s worth considering now if you’re planning major capital expenditure.

Corporation Tax: No Changes, But Watch the Margins

• 25% rate applies to companies with profits over £250,000

• 19% small profits rate applies up to £50,000

• Between those bands, a tapered marginal rate of 26.5% applies

These limits are shared across associated companies, including any under common control in the last 12 months, whether based in the UK or not. This means even dormant or international subsidiaries could reduce your tax bands.

Tip:

Ensure your group structure is reviewed, especially if you’re near the £50k or £250k thresholds, as you may be paying a higher effective rate than necessary.

Electric Vehicles & Charging Points: Relief Extended

If you’re going green, there’s good news:

• 100% capital allowance for electric vehicles and EV charging infrastructure will remain until:

  • 31 March 2026 for companies

  • 5 April 2026 for sole traders/partnerships

If you’ve been delaying switching to electric, now’s the time to reassess the business case.

Creative Sector Boost: Enhanced Reliefs for Film & High-End TV

From 1 April 2025, film and high-end television productions can claim:

• An enhanced 39% Audio-Visual Expenditure Credit (AVEC) for UK visual effects

• This exempts visual effects costs from the usual 80% qualifying expenditure cap

• Applies to costs incurred from 1 January 2025

To claim:

• Productions need a final BFI certificate

• Interim claims can still be made using the 34% standard AVEC rate

This is a significant boost for the UK’s post-production sector and will benefit visual effects-heavy productions and media companies with UK teams.

Summary: 2025/26 Business Tax Planning at a Glance

How Merranti Can Help

Whether you’re a retailer facing higher rates, a manufacturer investing in machinery, or a creative studio planning your next production, the right tax planning could save you thousands — or open the door to substantial reliefs.

Review business rates strategy and mitigation options
Assess eligibility for full expensing and EV capital allowances
Optimise your group structure to reduce Corporation Tax
Help creative companies maximise AVEC and secure BFI certification
Ensure your cashflow accounts for the 2025/26 business tax shift

Let’s review your 2025/26 business tax exposure — before those reliefs vanish.