Tax Tips Every Fashion Business Owner Should Know (2025 UK Edition)!
Written by Nidhi Yadav
Navigating the tax landscape is crucial for the success of any fashion business. In 2025, several tax changes in the UK will impact the fashion industry. Understanding these updates can help you optimise your finances and ensure compliance. Here are some essential tax tips tailored for UK fashion entrepreneurs in 2025.
Increased National Insurance Contributions (NICs)
- Starting April 6, 2025, employers’ National Insurance contributions will rise from 13.8% to 15%. This increase means higher costs for businesses with employees. To manage this:
- • Budget Adjustments: Review and adjust your financial plans to accommodate the increased NICs.
- • Staffing Strategies: Consider the financial implications when planning new hires or salary increases.
Anticipate the Minimum Wage Increase
- The minimum wage will increase by 6.7% to £12.21 per hour in April 2025. This change affects:
- • Payroll Expenses: Ensure your payroll systems are updated to reflect the new rates.
- • Pricing Strategies: You may need to adjust product prices to maintain profitability.
Understand Corporation Tax Rates
- The main rate of corporation tax remains at 25% for businesses with profits over £250,000. For profits below £50,000, a lower rate of 19% applies, with a sliding scale for profits between these thresholds. To optimise your tax position:
- • Tax Planning: Work with a tax advisor to explore strategies that align with your profit levels.
Leverage Business Rates Relief
- Retail, hospitality, and leisure businesses will continue to receive business rates relief until April 2026, albeit at a reduced discount rate of 40% from April 2025. To benefit:
- • Eligibility Check: Confirm your business qualifies for this relief.
- • Application Process: Follow the steps to apply and ensure you receive the discount.
Adapt to Making Tax Digital (MTD) Requirements
- The UK’s Making Tax Digital initiative mandates digital record-keeping and online tax submissions. By 2025, all businesses, including those in the fashion sector, must comply. To prepare:
- • Digital Tools: Invest in accounting software compatible with MTD requirements.
- • Training: Ensure your team is trained to use digital tools effectively.
Utilise the Employment Allowance
- Eligible businesses can reduce their National Insurance bill by up to £5,000 annually through the Employment Allowance. To take advantage:
- • Eligibility Assessment: Determine if your business qualifies for this allowance.
- • Claim Process: Apply through your payroll software or HMRC’s Basic PAYE Tools.
Explore Research & Development (R&D) Tax Relief
- If your fashion business engages in innovative activities, such as developing new materials or sustainable practices, you might qualify for R&D Tax Relief. This relief can significantly reduce your tax bill. To benefit:
- • Identify Qualifying Projects: Assess which projects meet the R&D criteria.
- • Documentation: Maintain detailed records of R&D activities and expenditures.
Stay Informed on Tax Administration Changes
The UK government plans to increase the Income Tax Self Assessment reporting threshold for trading income from £1,000 to £3,000 within this parliament, simplifying tax obligations for small-scale entrepreneurs. To adapt:
- • Review Income Streams: Determine if this change affects your reporting requirements.
- • Adjust Record-Keeping: Align your financial records with the new thresholds.
By staying informed about these 2025 tax changes and implementing proactive strategies, your fashion business can navigate the evolving landscape effectively.
Always consult a tax professional to ensure compliance and optimise your tax position.
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With the right knowledge and preparation, you can turn tax challenges into opportunities for growth and sustainability in your fashion business.
These measures demonstrate the government’s commitment to supporting the growth and development of the UK’s creative sector.
Need Help?
- Contact Pennyhills® today to schedule a consultation with one of our experienced accountants.
We can help you take proactive steps, ensuring compliance whilst minimising your tax exposure.
Visit www.pennyhills.com/contact-us or Click here to chat now and discover how we can partner with you on your journey. You deserve the expertise and dedication that Pennyhills® brings to the table. Let’s embark on this journey together.
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