Entity Setup
Entity Setup in the UK After the 2024-25 Changes: Choosing the Best Structure
With landmark reforms including higher employer NICs, new CGT rates, and reforms to inheritance tax, picking the right vehicle for business or investment is more important than ever.
By NomadicTax Research Team • 5-8 min read • November 22, 2025
## Overview of Recent Changes Affecting Entities
Key changes introduced in the **Autumn Budget 2024**, effective across 2025-26 and beyond, include:
- Employer National Insurance Contributions (NICs) rate increased from **13.8% to 15%** from 6 April 2025. Also, the Secondary Threshold was lowered from **£9,100 to £5,000**. ([kpmg.com](https://kpmg.com/uk/en/insights/tax/autumn-budget-2024-overview.html?utm_source=openai))
- Capital Gains Tax (CGT) main lower rate raised from **10% to 18%**, and higher rate from **20% to 24%**. Business Asset Disposal Relief (BADR) and Investors’ Relief scheduled to rise more gradually: BADR rate stays at 10% for a period, then 14% and ultimately aligns with CGT main rate for lower rate Band. ([kpmg.com](https://kpmg.com/uk/en/insights/tax/autumn-budget-2024-overview.html?utm_source=openai))
- Inheritance Tax (IHT) thresholds frozen until **April 2030**, and inherited pension pots will be subject to IHT from 6 April 2027. ([kpmg.com](https://kpmg.com/uk/en/insights/tax/autumn-budget-2024-overview.html?utm_source=openai))
## Choosing Between Structures: Limited Company vs Sole Trader vs LLP
| Structure | Pros Under New Regime | Challenges Under New Regime |
|---|---|---|
| **Limited Company** | Corporation Tax (fixed rate), ability to retain profits, dividend planning. May shield personal exposure to CGT where shareholdings are held via shareholders. | Dividends still taxed at personal income tax rates; extraction of profits can trigger CGT; increased employer NICs affect employee-director remuneration schemes. |
| **Sole Trader / Self-Employed** | Simpler setup, lower administrative burden. Possible utilization of the CGT reliefs when disposing of business assets. | Exposure to personal tax rates on all profits; no buffer from NIC increases; inheritance tax exposure for business assets; liability on foreign income grows under residence-based regime. |
| **Limited Liability Partnership (LLP)** | Flexibility in profit sharing; potential for different treatment of profits for tax purposes; useful for joint ventures. | HMRC’s scrutiny of profit allocations; partner personal exposure; complex CGT and IHT planning required. |
## Tax Planning Tactics
- **Maximize use of 30-55% tax rates perspectives**: A company might help defer or retain profits rather than pay them out immediately.
- **Defer capital gains using BADR / Investors’ Relief before rate hikes kick in** where possible. Note staggered application for rates.
- **Inheritance tax planning**: For entities with big asset values (e.g. family businesses), consider trusts or asset disposals/transfers before IHT inclusion of pensions from 2027.
- **Employer NICs strategy**: Given increased cost, plan remuneration mix (salary vs dividends) carefully. For owner-directors, using company structure can reduce employer NIC exposure when extracting profits as dividends.
## Examples
- **Tech startup**: A founder could hold shares in the company and not expect to extract profits until a later sale. BADR may provide relief on disposal if structured well before CGT rates increase.
- **Property investor using a company**: Holds rental properties through limited company to benefit from lower corporate tax on profits, but must weigh CGT on company share sale vs individual CGT after relief changes.
- **Small manufacturer**: Shift to a company basis may reduce employer NIC burden once scaling employees, and possibly preserve profits for reinvestment rather than distributions taxed heavily.
## Steps to Implement
1. **Consult with tax advisors** to model total tax cost: corporate profits, dividends, salaries, CGT on exit.
2. **Ensure compliance systems are ready**: higher employer NICs, changed CGT reporting, etc.
3. **Document ownership** and share structures carefully especially for inheritance planning.
4. **Monitor upcoming regulations**: such as expansions to Making Tax Digital and thresholds that may affect reporting.
Setting up or restructuring entities now with the new rates in mind can yield significant savings and avoid surprises—especially related to CGT and IHT changes that are already legislated or proposed.