The date of the new tax year is April 6, 2025
We examine the changes in allowances and taxes and how they will impact you.
On April 6, a number of tax increases and benefit increases will take effect for the upcoming fiscal year.
As wages rise, income tax bands stay frozen, resulting in higher bills. Employees will eventually be impacted by changes in business national insurance rates.
Additionally, since the stamp duty holiday ended on March 31, homebuyers' tax bills will skyrocket. Higher stamp duty bills will result from the thresholds being lowered after being temporarily raised in September 2022 to reduce the cost of moving.
The tax increases follow increases in household bills in April for things like broadband, water, and council tax.
The most recent energy price cap went into effect on April 1st, raising gas and electricity bills for millions of households. The annual cost of gas and electricity for a household using a typical amount has increased by 111 to £1,849.
The good news for some is that the state pension and child benefit rates are increasing.
For the 2025 - 2026 tax year, we have reviewed the ten major changes that will take effect.
1. The income tax rate increases
Our bills go up if the thresholds (for England and Wales) within which we pay income tax aren't raised annually.
Millions of earners are forced to pay more taxes as wages rise due to the fiscal drag policy, which prevents allowances from increasing in line with the cost of living. It indicates a rise in the number of higher-rate taxpayers.
Scotland's income tax laws changed.
Income tax is computed a little differently if you reside in Scotland. Everybody's personal allowance remains at £12,570. Then there are the basic rate, intermediate rate, and starter rate tiers.
Beginning on April 6, there will be a 22.6% increase in the starter rate band and a 6.6% increase in the basic rate band. As a result, the thresholds for paying the basic and intermediate rates of tax will rise by 3 percent.
Based on the September 2024 Consumer Price Index, this increase is much higher than inflation, which is 1 point 7 percent.
2. The stamp duty rises
The alleged stamp duty holiday has ended, so buyers will now have to pay more for a home.
When purchasing a property valued at £300,000, first-time purchasers must begin paying stamp duty.
The previous threshold was 425,000, so buyers will now pay 6,250 in stamp duty for a property of this value instead of nothing. Additionally, the first-time buyer discount will reduce the maximum price of a property from £625,000 to £500,000.
The nil rate threshold for all other movers will revert to its previous value of 125,000 from 250,000.
3. Increases in business national insurance
The National Insurance contribution rate that employers are required to pay will rise by 1.2 percent, from 13.8% to 15%, starting on April 6, 2025.
Employers will probably try to offset the additional expenses because, even though this isn't a direct increase for individuals, hiring new employees will become more costly.
Benefits may be eliminated, and pay increases may be reduced.
4. Changes to the capital gains tax
Changes to Investors Relief (IR), formerly known as Entrepreneurs Relief, and Business Asset Disposal Relief (BADR) may result in higher capital gains tax bills if you intend to sell business assets in the upcoming tax year and beyond.
The gains tax rate goes up from 10 percent to 14 percent on April 6. It will increase gradually until it reaches 18 percent on April 6, 2026.
5. Increase in state pensions
Beginning on April 6, 2025, the state pension will rise by 4.1 percent. As a result, the full new state pension has increased from 11,502 in the previous tax year to 230.25 per week, or 11,973 annually.
The new state pension will be paid to those who became eligible after April 6, 2016.
The weekly payment for those receiving the full basic state pension has increased from 169.50 to 176.45, or 9,175 annually.
6. Benefits for children are raised
The child benefit rate is expected to increase by 1.7 percent. Families with a single child will thus receive 26 points per week for the first or only child and 17 points per week for the other children.
The number of children that a family can claim is unlimited.
On April 6, 2024, the child benefit regulations were modified to allow a parent making between £50,000 and £80,000 to receive all or part of the benefit.
Parents impacted by the high income child benefit charge (HICBC) will soon be able to pay the fee using their payslip due to changes in child benefit tax return regulations.
7. Limits on student loans
Repayment thresholds for Plan 1, Plan 2, and Plan 4 student loans will rise for the 2025 - 2026 tax year. The postgraduate loan (Plan 3) threshold of 21,000 is still in place.
If your income (before taxes) exceeds the weekly or monthly threshold for your plan, student loan repayments will begin automatically. The Student Loan Company (SLC) will receive 9% of your income over the threshold.
Eight.
The tax on holiday rentals is subject to change. Beginning on April 6, you will be responsible for paying higher taxes if you rent out your vacation home.
The favorable tax treatment for Furnished Holiday Lettings (FHLs) will be eliminated on April 6th, meaning that FHL properties will be treated similarly to other types of property income.
FHL mortgage interest will no longer be deductible from rental income for income tax purposes, which is a significant change.
9. Non-doms
. Beginning on April 6, so-called "non-dom" status will no longer be a component of the UK tax system.
After a four-year exemption period if you have lived outside the UK for ten years or more, all of your earnings made outside of the UK will be subject to taxation here.
This modification eliminates a sizable inheritance tax exemption for people who have spent ten of the previous twenty years in the UK.
10. .
Increases in council taxes. Starting in April, the majority of households in England will pay more in council tax.
In 2025 - 2026, 293 of the 384 authorities are utilizing the maximum amount of flexibility available, while 56 are nearly at the maximum, according to data from the Ministry of Housing, Communities, and Local Government (MHCLG).
In 2025 - 2026, the average council tax per residence will be 1,770.
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