Compliance
Ensuring UK Tax Compliance in the Era of Frozen Thresholds and Rising Rates
As thresholds freeze and rates rise, understanding compliance obligations—from PAYE to reporting foreign gains—is more important than ever to avoid costly penalties.
By NomadicTax Research Team • 5-8 min read • November 22, 2025
## The Changing UK Tax Landscape: What’s New
The UK Government’s latest Budget and Finance Act 2025 introduced several tax changes impacting how much tax you pay and how you report it. Rate and threshold changes mean higher effective tax burdens in areas like **capital gains**, **employer National Insurance**, and **inheritance tax reliefs**. Businesses and individuals must adapt to avoid compliance pitfalls. ([gov.uk](https://www.gov.uk/government/news/chancellor-chooses-a-budget-to-rebuild-britain?utm_source=openai))
Key areas changing:
- **Employer National Insurance (NIC):** From 6 April 2025, the employer NIC rate increases to **15%**, and the secondary threshold reduces from £9,100/year to **£5,000/year**. ([gov.uk](https://www.gov.uk/government/publications/autumn-budget-2024/autumn-budget-2024-html?utm_source=openai))
- **CGT rates increase** for disposals from 2025-26: 18% basic, 24% higher rate. ([legislation.gov.uk](https://www.legislation.gov.uk/ukpga/2025/8/part/1/enacted?utm_source=openai))
- **Inheritance Tax thresholds frozen until April 2030**. From April 2027 pension pots inherited will be IHT-liable. ([gov.uk](https://www.gov.uk/government/news/chancellor-chooses-a-budget-to-rebuild-britain?utm_source=openai))
- **Carried interest**: Reforms from April 2026 mean it's taxed as Income Tax + NIC with a multiplier, moving away from CGT treatment. ([gov.uk](https://www.gov.uk/government/calls-for-evidence/the-tax-treatment-of-carried-interest-call-for-evidence/outcome/the-tax-treatment-of-carried-interest-government-response-and-policy-update-june-2025-accessible?utm_source=openai))
## Compliance Actions You Should Take Now
1. **Review payroll and employer obligations**
- Ensure payroll systems are updated for the new employer NIC rates and thresholds from April 2025.
- Smaller businesses should track eligibility for **expanded Employment Allowance** (increased to £10,500 and without a cap for eligible employers) from the same date. ([gov.uk](https://www.gov.uk/government/publications/autumn-budget-2024/autumn-budget-2024-html?utm_source=openai))
2. **Report capital gains changes properly**
- For CGT-claiming disposals, ensure new rates are applied correctly.
- If planning a sale of shares or property, check whether BADR still applies and at what rate.
3. **Estate and inheritance reporting**
- Use updated IHT reliefs and thresholds; income from inherited pension pots post-April 2027 will need reporting for IHT.
- Trusts or wills should be reviewed under the reformed rules especially for those holding large business or agricultural assets.
4. **Foreign income and gains disclosure**
- For residents under FIG or non-FIG regimes, ensure all foreign income & gains arising after 6 April 2025 are disclosed correctly.
- Use TRF if applicable in 2025-26 or 2026-27 for pre-April 2025 foreign income/gains. Understand limitations around trusts.
5. **Document and record keeping**
- Maintain documentation showing periods of non-UK residence, trust instruments, remittances.
- Keep clear records of overseas income, dividends, gains, and distributions to support claimed reliefs or eligibility.
## Risks of Non-Compliance
- Mis-reporting foreign income/gains could lead to under-reporting penalties.
- Incorrect CGT application may result in unexpected tax bills and interest charges.
- IHT surprises for heirs if thresholds and reliefs not planned ahead, especially with pension pots coming into scope from 2027.
- Employer NIC miscalculations for companies could draw parliamentary inquiries or HMRC enforcement.
## Practical Compliance Example
Alice runs a small business with three employees earning the National Living Wage. With the new threshold and employer NIC rate, her payroll costs will increase from April 2025 significantly. She updates her payroll software, budget forecasts, and considers increasing prices to cover the extra NIC expenses.
Bob inherits pension benefits during 2028. Prior to reforms, pension pots had been largely outside inheritance tax; now, from 2027, they will be included—so Bob must take IHT into account when receiving them.
## Summary
With frozen thresholds, rising rates, and reworked rules around capital gains, inheritance, and non-dom taxation, UK taxpayers need to stay vigilant. Proper updates to payroll, proactive estate and foreign income planning, and attention to reporting requirements are essential. Keeping ahead of deadlines and documenting your position will save you from costly surprises.