The UK government’s Budget and fiscal policies in recent years have focused on economic growth, post-pandemic recovery, support for innovation, and anti-fraud measures. The latest developments affect both small and large businesses, with major updates in corporation tax, investment relief, compliance, and digitalisation.

Below is a summary of the most up-to-date information affecting UK businesses in 2025:

Corporation Tax

The corporation tax rate changes announced in 2021 took effect in April 2023 and remain valid in 2025:

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

• 19% rate retained for “small profit rate” companies earning under £50,000

• Tapered rate for companies with profits between £50,000 and £250,000

• Diverted Profits Tax is currently set at 31%

New in 2025:

• Full expensing relief is now permanent:
  Companies can deduct 100% of the cost of qualifying new plant and machinery from taxable profits in the year of purchase. This replaces the previous “super-deduction” (which ended in 2023).

• No cap on investment: Applies to main-rate assets (excluding cars, buildings, and leased assets).

• Enhanced reliefs also apply to certain R&D-intensive businesses.

Value-added tax (VAT)

• VAT registration threshold remains at £85,000 until April 2026.

• The UK continues its Making Tax Digital (MTD) programme:

  • MTD for VAT is mandatory for all VAT-registered businesses.

  • MTD for Income Tax Self Assessment (ITSA) applies from April 2026 for self-employed individuals and landlords earning over £50,000.

• All submissions must be done through HMRC-approved digital software.

R&D Tax relief reform

Significant changes were made to the R&D Tax Relief Regime in April 2024, and these are still in effect in 2025:

• The SME scheme and RDEC scheme have been merged into a single R&D scheme for most businesses.

• Enhanced support (27% effective benefit) still exists for R&D-intensive SMEs (defined as those spending 40%+ of total costs on qualifying R&D).

• Overseas R&D costs are generally excluded unless under strict conditions.

• Digital submission of claims and additional disclosures (e.g. project-level breakdowns) are now mandatory.

Help to Grow Scheme

The Help to Grow: Management and Help to Grow: Digital schemes continue in 2025:

Help to Grow: Management

• A 12-week government-subsidised leadership course for SME senior leaders

• Delivered by UK business schools

• 90% subsidised by the government

Help to Grow: Digital

• Offers discounts on approved software (up to £5,000) for eligible businesses

• Covers digital accounting, CRM, and ecommerce tools

• Continued funding is subject to regional availability

UK Freeports and Investment Zones

8 Original Freeports (announced in 2021) remain active:

• East Midlands Airport

• Felixstowe and Harwich

• Humber

• Liverpool City Region

• Plymouth

• Solent

• Thames

• Teesside

Investment Zones (2023–2025 rollout):

• These new zones offer enhanced tax reliefs, business rates retention, relaxed planning rules, and funding for innovation in high-growth sectors like AI, clean energy, and advanced manufacturing.

• Examples include zones in Greater Manchester, West Midlands, and Glasgow.

Compliance & Anti-Fraud in 2025

Under the Economic Crime and Corporate Transparency Act (ECCTA) in force from 2024:

• All UK company directors, People with Significant Control (PSC), and filing agents must complete identity verification

• Registered email addresses must be provided and verified

• Companies House is gaining new powers to reject or remove suspicious filings

• Software-only filing is becoming mandatory for most company filings

The UK Budget trends for 2025 

The UK government is steering businesses toward digital compliance, greater transparency, and investment in innovation. While corporation tax has increased for larger firms, incentives for capital investment and R&D remain strong.

The focus is on creating an environment where well-run, compliant, and tech-savvy businesses can thrive.

Looking to open a business in the UK? With 1Office, you’ll be guided through each step, from formation to compliance, ensuring a smooth and compliant setup process. Learn more about our UK company formation service here.