UK Tax Changes 2025: What They Mean for Your Money

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Introduction and Overview of Tax Changes

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Happy New Year everybody. Well, I know it’s not January 1st, but it’s April 6th. It’s the start of a new tax year in the UK and in today’s episode, we are gonna break down the biggest tax changes for 2025 that impact the average UK taxpayer. Basically, you and me. We’re talking what’s changed and what’s not changed in terms of things like income tax, national insurance, personal allowance, pension rules and changes to things like capital gains, dividends, ISAs, and even savings interest.

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By the end, you’ll know exactly what’s changed and how it affects your paycheck, your savings, or your pension. No more nasty surprises. Ready? Alright, let’s go. Okay.

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Income Tax Updates for 2025

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First of all, income tax. This is the tax on your salary, pension, or other income. The big news here is that the rates themselves haven’t gone up or down for 2025, so phew for that. The basic rate is still 20%, the higher rate is 40% and the additional rate is 45%. However, the income thresholds—those are the points at which you move into a higher tax band—have stayed the same… again. You see, your personal allowance, which is the tax-free portion of your income, is frozen at 12,570 pounds.

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This means that everyone can earn 12 and a half grand a year without paying income tax on it. Sounds good, but here’s the catch: usually this allowance might rise a bit every year with inflation, but it’s been stuck at 12,570 pounds for a few years and will continue to remain so, in fact, it’s set to stay frozen until 2028… oof. Translation: as your wages hopefully go up over time, that tax-free chunk isn’t growing with them. So more of your income could become taxable. This phenomenon is—this phenomenon is what’s known as fiscal drag. Think of it like this: if the doorway stays the same height while you grow taller, you are more likely to bump your head, a problem that I will never have at five four.

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Here, the doorway is the tax-free limit. The bottom line here is that the government didn’t change the income tax rates, but by freezing allowances and bands, inflation might bump up more of your income into higher tax brackets. So for example, if you got a cost of living pay rise, a bit more of it might go to the tax man just because those thresholds didn’t change. Pretty sneaky, right? But at least now, you know.

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National Insurance Changes

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Okay, now to national insurance or NI changes: essentially another tax on earnings, used to pay out things like state pensions and benefits.

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There are some pretty big changes here and they’re mostly good news for workers. So for employees, the national insurance contributions on your wages have been cut. Last year, you were paying 12% NI on earnings between 12,570 pounds and 50,270 pounds. But this year, from April, 2025, you’ll pay just 8% on that band of earnings. That’s a 4% drop. To put it into perspective, if someone earns around 30,000 pounds a year, they used to pay roughly 2,100 pounds in NI, but now that might actually only be around 1,400 pounds, so 700 pounds extra in their pocket over a year, or 58 pounds a month.

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Now this cut was actually phased in, a portion in January, and now more from April, but the end result here is more net pay for employees above earnings of 50,270 pounds. The NI rate is still 2%, the same as before.

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For those of you on pay as you earn, this should be quietly embedded in your payslip. If you compare your March versus April payslip, you should be able to spot that difference. Now, for those of you that are self-employed, you’ve got NI changes too. You used to pay what’s called class 2 NI, which was a small, flat weekly amount, about three pound 45 per week if your profits were above a certain level. From now on class 2 NI is abolished for most people. That’s one less bill to worry about each year, and you save around 179 pounds annually. Also, the main rate of Class 4 NI, which was the percentage on your profits, dropped from 9% to 6% on profits between 12,570 pounds and 50,270 pounds.

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Actually pretty similar to the employee cut there. Above 50 grand of profits, it’s still 2%, again, similar to what employees have to pay. So the good news is self-employed folks get to keep more of their earnings too. Now, one heads up here is that even though class 2 NI is gone, if your profits are relatively low you still might want to voluntarily pay that Class 2 NI to earn credits towards your state pension.

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Normally, earnings over 6,725 pounds of profits automatically gives you the years NI credit, even with no class 2 paid now, but if you’re below that, you can choose to actually pay this to secure your state pension qualifying year. So it’s worth checking so you don’t accidentally miss out on a year’s worth of state pensions while still enjoying the tax cut.

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Okay, now onto employers. If you run a business or have employees, or maybe you’re just an employee curious about your company’s costs, the employer NI contributions have increased in 2025.

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Employers now pay 15% on most employees earnings, and that’s up from 13.8%. And the threshold at which employers start paying NI has dropped all the way down to 5,000 pounds. So basically, in short, it’s got pricier for companies to employ people. Now, this won’t directly come out of your salary, but it might make some bosses a bit grumpy and could affect wage rises or hiring plans.

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Now, the silver lining for businesses is that the employment allowance, which is a credit that small employers can use to offset NI bills, has doubled from 5K to 10.5K. Basically for employees, the key takeaway is that your company’s costs went up, but your NI contributions have gone down. Now we touched on the personal allowance at 12,570 pounds being frozen.

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Tax-Free Allowances and Marriage Allowance

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Let’s expand on a couple of tax-free allowances because there are a few to note here. The first is marriage allowance. This isn’t new for 2025, but since we’re talking about allowances, if you’re married or in a civil partnership and one of you earns under that personal allowance, that person can actually transfer 10% of their personal allowance to the other person.

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Now the income limit for this has just ticked up slightly so you can now claim it if the higher earner is a basic rate taxpayer earning under 50.2 grand. This can save about 252 pounds in tax per year if used correctly. It’s often missed, so it’s worth checking if you qualify.

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Not exactly a rule change this year, but consider it a friendly reminder. Also things like rent a room and trading allowances are still in effect. So if you rent out a room in your property while you still live there, the first seven and a half grand of rental income you get is tax free. Pretty useful if you live in London and you’ve got a couple of spare rooms. If you’ve got a side hustle, the first a thousand pounds of income is tax free, so no changes there, but good to keep in mind, in case you consider picking up a side gig. We’ll cover specific allowances for things like capital gains and dividends later on in this episode. The theme so far of 2025 is that many tax free allowances have been slashed or frozen, so plan accordingly.

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Pension Tax Changes

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Okay, onto pensions. Pensions might not seem like tax, but they come with plenty of tax rules and perks. There are some major—They come with plenty of tax rules and a few perks, but they come with plenty of tax rules and some very good perks. There were some major pension tax changes recently that continue into 2025, and knowing them can help you maximize your retirement savings. The first is no more lifetime allowance. This is a big one. See, the lifetime allowance, which was used to cap the amount that you could have in your pension pot without paying extra tax, which used to be about 1.07 million pounds, has been abolished.

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See, as of the last tax year change in April of 2024, there’s now no strict limit on how large your pension can grow. Sounds pretty good for those aiming to be pension millionaires, right? But—and there’s always a but—the amount that you can take out of your pension pot tax free is effectively capped.

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See, usually you can take 25% of your pension as one tax free lump sum. With the lifetime cap now gone, the government didn’t want people withdrawing like half a million pounds tax free in one go. So what they’ve done is they’ve capped the tax free lump sum that you can take out at a nominal value of 268,275 pounds, which is 25% of that old 1.07 million pound allowance.

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So effectively you can’t take any more out of your pension pot as a lump sum tax free, even though you can now put in more in your pension pot than ever without paying any extra tax.

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After you’ve taken out this lump sum, any amount that you withdraw above that will then be taxed as regular income. Now, for most people, this won’t matter. Not everyone has an absolutely colossal pension pot, but it’s good to know. If you’ve had protections or already a large pot there are some transitional rules, but for beginners, just know that the big, bad lifetime limit is no more.

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And finally, the state pension has gone up. Now, this is not a tax rule change, but it’s worth noting. It’s got a boost from April this year thanks to the triple lock. The full new state pension is now around 230 pounds a week, up from 221. If you’re a pensioner, more income is great, but remember, this does count towards your personal allowance. More pensioners might need to therefore pay a little bit more tax if their state pension plus other pension income now exceeds that 12 and a half thousand pounds personal allowance.

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So in terms of pensions, the takeaway is for most working people, the pension tax changes are positives. So many could consider upping your pension contribution a little bit, especially with any extra take home pay from the NI cut.

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The tax relief on pensions is basically like getting free money added. The government tops up your contributions by your marginal tax rate, and now the rules are more flexible. So future retired you will thank present you.

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Okay.

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Capital Gains Tax Adjustments

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Now onto capital gains tax. This is the tax on profits when you sell things like stocks, crypto, or a second property. Even if you’re just starting out, you might have some investments or you might sell a valuable asset one day, so it’s pretty useful to know. Before we talk about the changes made recently, let’s give a quick overview of the CGT tax-free thresholds.

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Now, three years ago, you could have gains of up to 12,300 pounds a year tax free. Two years ago, that went down to 6,000 pounds. And as of last year, the 2024 year, and continuing into this year, that is all the way down to just 3,000 pounds. And that’s a pretty small cushion.

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It means that if you sold some shares outside of an ISA, or something like a buy-to-let property and made let’s say 5,000 pounds of profit, only 3,000 pounds of that is tax free. The remaining 2,000 pounds would be taxed. This change is a bit of a stealth tax hike on people who invest or sell assets. So if you’re not regularly selling investments, you might not feel this change immediately, but anyone with significant investments should be aware.

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Now, what has changed recently are the CGT rates themselves, so tax rates on capital gains for most assets like stocks, funds, crypto, et cetera—basically everything except your main home or other special cases—have increased for disposals, which is basically the technical term for selling, made after the end of October, 2024. So if you’re a basic rate taxpayer, your gains above that allowance of 3,000 pounds are now taxed at 18%, and that’s up from 10% last year.

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You’re a higher rate taxpayer, you’ll pay 24% on those gains up from 20% last year, and so that’s almost a quarter of your profit gone in tax if you are in the higher rate. Now as you may have noticed, I said that these have actually already changed. They changed the day that Rachel Reeves announced them in her budget in October.

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So why then, and not on April 6th, like most other things? The reason was most likely so as not to give a window of time between when she announced them in October and now in April, where people could just sell and dump their assets and take profits before having to pay more tax on them, which could have had a knock on effect of causing downward pricing pressure on some assets.

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Now, in terms of property gains, noting that you only pay CGT on selling property, the rates are 18% if you’re a basic income earner, and 24% if you’re a higher income earner, in line with the CGT rates that I talked about earlier. But interestingly, those higher rates for property have dropped slightly in line with these new CGT rates for other assets. Now, this is down from 28%, and this was most likely done to try and incentivise the selling of second homes to hopefully first time buyers or home movers.

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So with this, the tax to pay when buying a second property has actually also gone up, but we’ll cover that a little bit later. A key point here is that the CGT allowance of 3,000 pounds covers all gains together—property and shares. So if you’re planning to sell something valuable, try and utilize that small allowance wisely, and if you can spread those sales across tax years.

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And here’s a fun tidbit I’m gonna add onto this section. If you sell a business, the Business Asset Disposal Relief, which used to be called Entrepreneur Relief, has actually gone up. Basically, if you’re a business owner selling your company or shares within your company, there was a 10% rate that you would have to pay on the first million pounds of gain, obviously much lower than CGT. However, this has now been increased to 14% this year, and it will go up to 18% next year in line with the basic rate of CGT. So if you ever sell a business, there is more tax to pay here. So really from all of this so far, what should you do?

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The message basically is if you have investments, try and make use of tax shelters like ISAs so that your gains and dividends shielded. Also plan the timing of selling assets. That three grand allowance resets every April 6th. So strategic planning matters now more than ever.

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It might also encourage longer term holding or using your spouse’s allowance. So if married, you each get a three grand allowance and you can transfer assets between you before selling so that you can use both allowances. A little bit advanced, but a useful tip. It really pays to be married, apparently.

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ISA and Savings Interest Rules

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Okay, that brings us nicely onto ISAs and savings interest.

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ISA rules in 2025 are pretty much the same, which in this context is a relief because ISAs are your tax free best friends. The annual ISA allowance remains at a generous 20,000 pounds per person. You can also put up to 20K in ISAs this tax year as well, and you can spread that across cash ISAs, and stocks and shares ISAs as you like. As long as you only open one of each and all interest, dividends, and capital gains inside that ISA are tax free.

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So literally you could become a millionaire within your ISA, and everything you take out will be tax free. The only limit is the annual amount that you can put in. Now, there were rumors about cutting ISA allowances, especially for cash ISAs recently, but thankfully none of that has happened so far this year.

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So make sure that you use as much of that ISA allowance as you can if you have savings or investments, as it’s a use it or lose it each year.

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Now, all of what I’ve just said also applies to lifetime ISAs. There’s been no changes here. The LISA limit is still 4,000 pounds, and the government can top that up 25%, up to 5,000 pounds in total, and the junior ISA limit is still at 9,000 pounds, and these haven’t changed for a while.

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And just to touch on savings interest as well. For example, if you’ve got a savings account with a bank and you earn interest on that, there have been no real changes here, but because of the interest rates having climbed over the last few years, more people are earning significant interest on their savings, which is great, but it means that some people could face tax on that interest for the first time.

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Personal Savings Allowance is still a thousand pounds for basic rate taxpayers and 500 pounds for higher rate taxpayers, and zero for additional rate. A few years ago, interest rates were so low that a thousand pounds of interest meant having a pretty huge balance. But now having around 20,000 pounds in a, for example, 5% savings account would generate a thousand pounds of interest in a year, hitting that allowance. So the environment has kind of changed, even though the rules haven’t.

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So what to do here is if you find yourself earning more interest, consider spreading money with your spouse. Again, they get their own allowance or use cash ISAs, which are tax free, though sometimes their rates might be slightly lower. Also, the 5,000 pounds starting rate for savings still exists. So if your other income is very low, like if you’re a student or part-time worker earning under 12 and a half K, you can actually get up to 5,000 pounds more interest at 0% tax. Now, this won’t apply to most full-time workers, but it’s good to know, again, for students or part-time or shift workers or non earners or retirees with modest pensions.

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So in summary, ISAs and allowances are your friends. Tax rules tightened around them. So smaller allowances for gains and dividends and stuff like that, which is a nudge to use those tax shelters more than ever. If you’re taking home a bit of extra cash from the NI cut, consider putting it into an ISA that you treat as a savings account and it earn an interest tax-free. Little adjustments like that can make a big difference over time. Okay.

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Stamp Duty Land Tax Revisions

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Stamp duty land tax. Now the deadline for this has passed. Back in late 2022, the government had increased the 0% stamp duty threshold to stimulate the housing market, which was called the stamp duty holiday. So as of a few days ago, no stamp duty was charged on the first 250,000 pounds of a property purchase for non-first time buyers. First time buyers had an even higher 0% threshold of 425,000 pounds, as long as the property they were buying was under 625,000 pounds. And these higher thresholds meant that many buyers and especially first timers, had not been paying any stamp duty land tax on average priced homes.

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This was temporary. See, on the 1st of April, 2025, the stamp duty thresholds reverted to their previous lower levels. So for home movers or non-first time buyers, the 0% band dropped back down to 125,000 pounds from 250,000 pounds. So then above 125,000 pounds, you pay 2% on the portion between that and 250 grand, and then 5% on the portion from 250 grand to 925 grand, and then 10% between 925 grand and 1.5 million, and then 12% on anything beyond 1.5 million pounds.

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Now, for first time buyers, the 0% stamp duty threshold shrank to 300,000 pounds from 425,000 pounds, and then above 300 grand first time buyers pay 5% on the portion between that and 500 grand. If the property purchase price exceeds 500 grand, the first time buyer relief doesn’t apply at all, meaning that they have to actually pay the standard rates on the entire amount above 125K, which is kind of diabolical.

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For those of you living in London, I feel very bad for you. So basically, in short, the maximum property value to get any first time buyer relief has gone down from 625,000 pounds to 500,000 pounds. So what does this mean?

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After the 31st of March, 2025, most property purchases are going to incur that higher stamp duty than they would have if they completed before that date. So if you’re in the process of buying, you will have wanted to complete before the 1st of April to take advantage of those current higher thresholds.

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Exchanging contracts isn’t enough and the sale needs to finish or substantially complete to lock in those old rates. Okay, to see the impact of this, let’s look at a practical example. Let’s say we’ve got a 300,000 pound home being bought by a home mover, someone who is not buying for the first time.

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Now, if they completed by the 31st of March, 2025, the stamp duty on the 300,000 pound house is calculated on that portion above 250K at 5%. So they’d pay 5% of the 50,000 pound difference, which leads to a stamp duty of 2,500 pounds. Now, let’s say that they substantially completed one day later, on the 1st of April.

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So they would pay 0% on the first 125K, but now they would pay 2% between 125K and 250K, and then 5% on the remaining 50K. So that totals 5,000 pounds, so that’s 2,500 pounds extra in tax just because of timing. Effectively double the stamp duty for the same priced house, simply for missing the deadline.

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Okay, another example, just to make you feel even worse, we’ve got a 350,000 pound home and it’s a first time buyer purchasing the property. Now, before April 1st, that first time buyer would pay 0% stamp duty land tax because the property was under 425,000 pounds. But again, if they completed on the 1st of April or afterwards, that same purchase would incur a 5% on the amount over 300,000 pounds.

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So because the property was 350,000 pounds, that’s 5% of 50K, which is 2,500 pounds in stamp duty.

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So a first timer would need to pay an extra two and a half grand to buy the same priced house if they didn’t complete in time. If the house was 500 grand, the difference would be even larger. Before April 1st, a first time buyer that paid 500 grand, they would pay nothing on the first 425 grand and then 5% on the difference between that and the 500,000 pounds, which was the price they paid for the property. So that would be 5% of 75 grand, which would lead to a 3,750 pounds stamp duty bill.

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But after the jump, basically they would pay 0% on the first 300 grand, but then 5% on the next 200 grand, which is 10,000 pounds, a massive jump. 6,250 pounds more in tax. Now, a first time buyer purchasing a 500,000 pound property is a lot, but again, in somewhere like London that wouldn’t really be amiss. As you can see, missing the deadline here has costed home buyers thousands of pounds in extra tax. According to some analysis, about 74,000 buyers were expected to miss the deadline on the 31st of March. And effectively the government is forking in an additional 142 million pounds in stamp duty because of that.

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I really hope that you weren’t in that group. If you were, I am very sorry. If you recently bought a property and you completed before this deadline, you deserve a bottle of Prosecco to pop in your new fridge.

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Now, note here that these changes are only for England and Northern Ireland stamp duty. Scotland has something separate called the Land and Buildings Transaction Tax, and Wales has the land transaction tax with their own separate thresholds, and those weren’t affected by this particular rule reversion from the UK. So this only covers SDLT in England and Northern Ireland.

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Now, one more SDLT update. If you’re buying an additional property like a second home or a buy-to-let, there’s an extra surcharge on top of the standard rates that you would’ve usually paid.

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Now, I mentioned this a little bit earlier when talking about capital gains tax. That surcharge was 3%, but it has now increased to 5% again from the 30th of October of 2024. Basically meaning that if you already own a home and are purchasing another, you pay an additional 5% on all of the stamp duty land tax bands.

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So for example, a rental property for 300 grand completing in 2025 would incur the normal 5,000 pounds, which basically means that you have a 20 grand stamp duty bill. This change was implemented to curb buy-to-let investors a little bit, and took effect again immediately from the Autumn 2024 budget announcement date. Again, most likely to prevent a temporary surge of investors trying to just buy up loads of houses and driving the prices of homes up even further than they’ve already been going.

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So keep that in mind. If you’re in the market for a second property, your stamp duty bill is now higher than it was. Though know if you sell your old home, so that’s one that you’ve previously lived in within three years, you can actually reclaim it this surcharge, but you initially have to pay it during the property transaction.

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So basically the key takeaway is if you’re a home buyer, timing was everything. And now you have to pay more tax. So… yeah…

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Okay, just a quick note on this: this is probably a really stressful time for everyone involved in property transactions, buyers, sellers, solicitors, estate agents, et cetera. So if you’ve ended up being one of those unlucky few that has ended up with a higher than expected stamp duty bill, consider trying to speak to the seller or negotiate to reduce the purchase price of the property you are buying by something like half of whatever the extra tax bill you have to pay is. So for example, if you now have to pay 2,000 pounds more tax than expected because of these new stamp duty changes, see if you can reduce the sale price by 1,000 pounds. Now, in many cases, the seller may say no—but it doesn’t hurt to ask, and they’d probably rather continue with their current property transaction than it falling through in them having to start the sale all over again.

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Other Notable Tax Changes

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Okay, onto some other notable changes. Here are a few of the tax changes that have happened in 2025. The first is council tax, and you might have already noticed this, if you’ve had a recent bill from April of this year. Local councils in England and Wales have been allowed to hike their council tax by up to 5% and some even more with special permissions.

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Many households will see their council tax bills rise as a result, and the average council tax band D could go up by around a hundred pounds a year. It’s not directly central government tax change, but you’ll definitely feel this in your monthly outgoings. So consider adjusting your budget for this.

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The next is VED tax or road tax. So if you own a car, and especially in the EV, there’s a big change here. Electric vehicles are no longer exempt from road tax from April 2025.

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Electric car owners used to pay 0% VED, and now they’ll pay around 10 pounds for the first year, similar to very low emission cars. And then the standard rate after that, which is currently about 180 pounds a year, and that will be from the second year of ownership. Also, expensive EVs, so over 40,000 pounds, which is most EVs I think, will incur the luxury car supplements around 355 pounds extra per year, between years two and six of ownership.

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So if you are considering a premium EV, basically factor that in as it’s not going to be a completely tax-free experience to run anymore. So basically here the takeaway is the government is catching up on EV taxes as more people go EV, which the government is trying to really push, so they get more tax from doing that.

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Okay, next up is alcohol and tobacco. So taxes on cigarettes have gone up this year as usual, above inflation from late 2024 and alcohol duty store adjustments from February, 2025 with higher taxes on wines, spirits, and supermarket beer. But there’s been a little bit of a cut on draft beer pubs to try and help the hospitality industry.

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But if you enjoy a pint at home or a glass of wine, you might notice the prices have crept up slightly due to this. Nothing really that you can do here, just an FYI on why your favorite drink might now cost a few P more.

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Finally onto non DOM tax. This is niche, but it was kind of bought more into the news over the last few years because our ex-Prime Minister, Rishi Sunak’s wife, actually fell into this non DOM category. So if you or someone you know is a UK resident but has their domicile abroad, often called non doms, the rules have changed a lot.

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The remittance basis, which let non doms avoid UK tax on foreign income if not bought into the UK, has been abolished from April, 2025.

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Going forward, long-term UK residents will be taxed on worldwide income regardless. This is for more wealthy internationals in the UK like Rishi Sunak’s wife, but the average person really doesn’t need to worry here. The reason I mention it is because it’s a significant shift in UK tax policy.

Nik Giri: 00:29:16

Okay, that was a lot, but those are the key changes and a few extra tidbits of 2025. Take a breath. You’ve made it through the heavy stuff. Now, one thing that you might have noticed that I failed to mention during this was inheritance tax changes, which have been in the news a lot. And the reason this was, is because these inheritance tax changes are actually only taking effect next year in 2026. So in next year’s episode, should I make it, I’ll cover it then.

Nik Giri: 00:29:36

You’ve seen how income tax and NI changes affect your payslip, learned a little bit about the pension opportunities available now and discovered where you might need to adjust things like using ISAs or watching out for the lowered allowances on gains and dividends. Knowledge is power here, guys, and in this case it could save you money or at least save you from some financial surprises.

Nik Giri: 00:30:09

Debunking Tax Myths and Misconceptions

Nik Giri: 00:30:09

Time to lighten things up a bit and tackle some myths and misconceptions about these tax changes. You might have heard some chatter and rumors from friends, coworkers, random people on the street. I don’t know. And it’s easy to get the wrong idea. So let’s set the record straight on a few things.

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Myth number one. If I get pushed into a higher tax bracket, I’ll take home less money overall. Nope. This is just a misunderstanding. Some people fear that earning an extra one pound and crossing into the, let’s say 40% income tax band, means that all of their income now gets taxed more.

Nik Giri: 00:30:19

Don’t worry. The UK tax bands are what’s known as marginal, which basically means if you earn enough to go into a higher rate, only the slice of income you earn above that amount is taxed at 40%. Every pound below it is still taxed at the lower rate. You never lose any money by earning more.

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So for example, if you get a raise that puts you a hundred pounds into the higher tax band, that a hundred pounds is taxed at 40% instead of 20%. So you pay 40 pounds on it instead of 20 pounds, but you still up 60 pounds on that slice, right?

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You’ve still earned 60 pounds that can go into your bank account. Obviously taking into account things like national insurance and other expenses that you pay, your lower portion remains taxed at 20%.

Nik Giri: 00:30:29

So please don’t turn down a pay rise thinking that you’ll be worse off. That’s a myth. But do also consider the benefits that you could lose when you cross into higher tax bans.

Nik Giri: 00:30:30

If you do want to keep yourself in a lower band for any reason, you can ask your employer to put any earnings above that tax threshold into your pension contribution instead. So if you earn 50,200 pounds, you can ask your employer to put that 200 pounds into your pension, and pensions aren’t classed as taxable income, so that’ll put you back into the basic rate.

Nik Giri: 00:31:19

Myth number two, the new tax year automatically means I’ll pay more tax. Not necessarily, but some years, yes, taxes do creep up due to threshold freezes stealthy, as we mentioned at the beginning of this episode, but in 2025, we actually saw a mix, as you’ve heard, some taxes went down. So NI cuts meant that millions of workers get to keep more of their paycheck. So if you’re an average earner with no big investments, you might actually be slightly better off this year. Of course, if you have dividends or big capital gains, you will pay more tax on those because the allowances shrank and the rates went up. But the point here is that new tax year changes can give or take. It’s worth checking which changes hit your situation. Don’t assume it’s all bad or all good.

Nik Giri: 00:31:29

Myth number three, I started buying a house before the deadline, so I’ll avoid the new stamp duty changes. Now, unfortunately here, it’s all about the completion date, not when you had an offer accepted, and even not when you exchanged contracts. Some buyers might think I’m in escrow, or I exchanged contracts in March, 2025, so I’m safe. Unfortunately not.

Nik Giri: 00:31:50

To get the previous stamp duty rates, your purchase must have legally completed by the 31st of March, 2025. Even if you were 99% through the process, if that final completion happened on the 1st of April or later, the new hire tax has kicked in. And this can have a huge financial impact as we talked about earlier.

Nik Giri: 00:31:59

Myth number four. No, well, there’s nothing I can do about these tax changes. I just have to take the hit. Okay. While you can’t stop a law from changing, you can absolutely adapt your personal situation to try and soften the impact or take advantage of new opportunities. For instance, you can use your IS A allowances to shield savings and investments from tax.

Nik Giri: 00:32:00

This bypasses the lower CGT and dividend allowances outside of this. So for example, if dividends outside of an IS A are taxed after 500 pounds, holding onto dividend paying assets inside IS A will ensure that any dividend you earn is tax free.

Nik Giri: 00:32:19

While you can’t stop a law from changing, you absolutely can adapt your personal situation to try and soften the impact or take advantage of new opportunities. So let me break this down into a few examples. Number one, you can use your IS A allowances to shield savings and investments from tax. Number two, consider pension contributions or salary sacrifice if you’re nearing a higher tax bracket or thresholds like the child benefit clawback.

Nik Giri: 00:32:27

Contributing more to your pension not only benefits you from the new higher pension limits, but it also reduces your taxable income, which will keep you in that lower tax band if you set it up correctly so you pay less income tax and national insurance. It’s basically a way to beat fiscal drag by outsmarting it.

Nik Giri: 00:32:30

Number three. If you’re a couple with one higher earner and one lower earner, you can shift your savings or investments to the lower taxed person. For example, you can put more interest bearing savings in the name of whoever has the thousand pound personal savings allowance in the basic rate versus the one with only 500 pounds personal saving allowance if they’re in the higher income tax rate. Or you can transfer some shares to utilize both persons 500 pound dividend allowance. Optimally married couples can also consider the marriage allowance transfer if one is a non taxpayer and the other is in the basic rate.

Nik Giri: 00:32:50

Number four, make sure you stay alert to adjust your tax code or file a self-assessment tax return if you need to, with new income from interest or dividends becoming taxable. Some people who might have never had to file a self-assessment tax report might now have to inform HMRC so that they can adjust your pay as you earn code. It’s not always automatic. Just a quick check can prevent paying too much or too little tax, and then facing a tax bill. Surprise later.

Nik Giri: 00:33:00

And number five, on stamp duty. If you can’t beat the deadline, maybe again, try and negotiate the price with the seller to share that extra tax burden.

Nik Giri: 00:33:08

Okay, everyone feeling more confident? I hope so. Sometimes just dispelling these misconceptions can reduce anxiety about finances. Now, you know, higher tax bracket won’t punish you for success and new tax year isn’t automatically doom and gloom. Folks should still stay informed. And ISAs and pensions are your friends.

Nik Giri: 00:36:03

Conclusion and Final Thoughts

Nik Giri: 00:36:03

And there you have it. Everything you need to know about the new UK tax rules for 2025. Remember, everyone’s situation is a bit different. So take these insights and see how they apply to you. This episode is for education and a general audience, and it’s not personal tax advice. If you’re ever unsure about your specific circumstances, it might be worth chatting to a qualified advisor or checking official HMRC resources.

Nik Giri: 00:36:08

If you know anyone who might have been baffled by these new tax rules, maybe a friend, family member or that colleague who thinks their paycheck change was magic, share this episode with them. Spread the knowledge. Financial literacy is for everyone. Thank you so much for listening till the end. You are awesome for taking charge of your finances. Now stay tuned for more finance content coming your way. And until next time, keep learning, keep growing, and have a fantastic financial year ahead.

Nik Giri: 00:36:50

My name is Nik Giri and I’ll see you in the next episode. [00:37:00]