The UK tax landscape is constantly evolving, and 2025 will bring several significant changes that could impact individuals and businesses. Here are five key tax changes to be aware of:
Capital Gains Tax.
Capital gains tax (CGT) is charged on the profits made from selling assets, such as investments or property.
At the Autumn Budget, the Chancellor announced that CGT rates on assets would increase from 10% to 18% for basic-rate taxpayers and from 20% to 24% for higher-rate taxpayers.
The change took place immediately and brings UK CGT rates on assets in line with rates on selling a second property.
Remember, you’ll only pay CGT on any gain you make rather than the sale price. Gains can also be offset against losses made when selling other assets.
Stamp Duty Holiday coming to an end.
The UK government will end the current extra stamp duty relief for first-time buyers and home movers in England and Northern Ireland on 31 March 2025.
From 1 April, the stamp duty threshold for first-time buyers will drop from £425,000 to the previous rate of £300,000.
From the same date, home movers will pay stamp duty on purchases over £125,000 rather than the current £250,000.
A home mover buying a £500,000 property in England or Northern Ireland now pays £15,000 in stamp duty, an increase from the previous £12,500.
The Autumn Budget delivered bad news for those seeking buy-to-let or second homes by announcing an increase in stamp duty for these properties. This change took place immediately.
Work out the tax due using this Stamp Duty Calculator
New ISA Changes-what you need to know.
Inheritance Tax & Pensions
When you die, if your estate is worth more than £325,000, your beneficiaries will be liable to pay UK inheritance tax of 40% on anything above this threshold.
The threshold rises to £500,000 if the estate includes a residence passed to direct descendants and up to £1m when a tax-free allowance is passed to a surviving spouse or civil partner due to applying for the residence nil-rate band at £175,000
The current UK tax IHT thresholds were due to be frozen until 2028, but this has been extended until 2030.
In addition, pension funds will count as part of your estate for IHT purposes from April 2027. While this change is still some years away, you may want to consider it now when making plans to pass on your assets.
UK Tax & Employer National Insurance increase
The government will increase National Insurance contributions for employers from 13.8% to 15% from 6 April 2025.
The government will lower the threshold for when employers need to start paying the tax from £9,100 to £5,000.
Prior to the Budget, some critics warned that these changes could indirectly impact employees through lower pay increases or reduced benefits.
UK Tax and the end of the Non-Domicled Tax Regime
From April 2025, the UK will abolish its long-standing non-domicile tax regime.
The UK government will tax all UK residents on their worldwide income and gains, regardless of their country of origin.
This change will significantly affect high-net-worth individuals who have previously benefited from the non-domicile status. It’s crucial to seek professional tax advice to understand the implications and explore potential mitigation strategies.
