UK Tax Changes for the New Fiscal Year
- TBA
- Apr 25
- 4 min read
With the new financial year, a series of tax increases announced in last autumn’s budget came into effect. These changes impact not only income tax, corporation tax, and capital gains tax but also pension reforms, national insurance adjustments, and taxation on high earners and new UK residents’ global income.
Which Tax Increases Are Being Implemented?
With these tax changes, how should individuals and businesses plan their finances to adapt to this more challenging tax environment?g and you carry out repairs that meet conservation standards, you may be entitled to relief.
Stamp Duty Land Tax
From 1 April 2025, the tax-free threshold for standard residential property transactions was halved from £250,000 to £125,000, meaning more property transactions will be subject to tax.
Additionally, from 1 April, changes to first-time buyer relief include:
The tax-free threshold will be reduced from £425,000 to £300,000.
The maximum property price eligible for the 5% stamp duty rate will decrease from £625,000 to £500,000.
Buyers of properties exceeding £500,000 will no longer be eligible for any first-time buyer relief and must pay the standard stamp duty rates.
These changes mean higher tax burdens for buyers, particularly first-time buyers and those purchasing mid-priced properties.
Income Tax
As previously announced, income tax thresholds and personal allowances will remain frozen until 6 April 2028:
The personal allowance remains at £12,570.
The 20% basic rate applies to income from £12,571 to £50,270.
The 40% higher rate applies to income from £50,271 to £125,140.
The 45% additional rate applies to income above £125,140.
Inheritance Tax
The inheritance tax nil-rate band of £325,000 will also remain frozen until 6 April 2028. Given inflation and wage growth, more taxpayers will gradually move into higher tax bands, increasing their tax burden.
Employer National Insurance Contributions (NICs)
From 6 April 2025, employer NICs rose from 13.8% to 15%. The threshold for employer NICs will also be lowered from £9,100 to £5,000.
Capital Gains Tax (CGT)
Since 30 October 2024, the CGT rate for individuals and trustees disposing of assets has increased from 20% to 24%.
From 6 April 2025, the CGT rate for Business Asset Disposal Relief (BADR) will be 14% (from 10%)
From 6 April 2026: 18%
Council Tax
From 1 April, millions of households saw an increase in their council tax bills. Most English councils will raise council tax by 4.99% without triggering a referendum. However, six areas will introduce larger increases in 2025/26:
Bradford: +10%
Newham, Windsor & Maidenhead: +9%
Birmingham, Somerset, Trafford: +7.5%
Exemptions and discounts:
Students do not pay council tax.
Single-person households receive a 25% discount.
Households with a disabled person may qualify for a discount.
In Scotland, council tax in 13 regions will rise by at least 10%, while in Wales, increases will range between 5% and 9.2%. Northern Ireland collects domestic rates instead of council tax.
Abolition of the Non-Domicile Tax Regime
From 6 April 2025, the non-domicile tax regime was abolished and a new residence-based system for foreign income and gains (FIG) was introduced:
Individuals who were non-UK tax residents for 10 consecutive years but become UK tax residents will receive a four-year 100% tax exemption on foreign income and gains.
After four years, global income and capital gains will be taxed in the UK.
For existing non-domiciled individuals:
Temporary Repatriation Facility: Between 2025/26 and 2026/27, they can remit overseas income at a reduced 12% tax rate. From 2027/28, normal tax rates will apply.
CGT Rebase: Individuals who held foreign assets before 5 April 2017 can use their value on that date as the tax base.
Inheritance Tax: Long-term residents (10 out of the past 20 tax years in the UK) will be subject to UK inheritance tax on foreign assets for 3-10 years after leaving the UK.educt mortgage interest from rental income but can instead claim a 20% tax credit.
National Living Wage (NLW)
From 1 April:
The minimum wage for 16-17-year-olds increased by 18% to £7.55 per hour.
The rate for 18-20-year-olds rose by 16% to £10 per hour.
The minimum wage for 21+ employees increased by 6.7% to £12.21 per hour.
Overseas Workday Relief
From 6 April 2025, HMRC introduced an expedited process ensuring that PAYE deductions apply only to UK-based earnings, not overseas income, for internationally mobile employees. Compliance checks will still be required.
Vehicle Excise Duty (VED)
From April 2025:
Tighter CO2 bands: Vehicles emitting over 130g/km CO2 will face higher first-year rates.
EV exemption ends: Electric vehicles will be subject to an annual £165 standard rate.
Luxury surcharge: Vehicles over £40,000, including EVs, will incur an extra £355 charge annually for five years.
Stronger enforcement: Unpaid VED will incur a 10% penalty and stricter ANPR camera enforcement.
Household Bills
From 1 April:
Water bills: Up 26% (£123 annually).
Energy prices: Average household energy bills will rise to £1,849 per year, adding £9.25 per month.
TV licence: Increasing by £5 to £174.50.
The View from TB Accountants
The upcoming tax and cost increases in April will significantly impact UK households and businesses. Domestic policy changes and global trade tensions add further uncertainty to the UK economy.
In its latest statement, the Office for Budget Responsibility revised down the UK’s 2025 GDP growth forecast from 2% to 1%. Inflation is expected to average 3.2% in 2024, peaking at 3.8% in July.
The Bank of England will announce its latest interest rate decision in May, impacting homebuyers and savers alike. Understanding tax changes and making adjustments will help individuals and businesses maintain financial stability.
