UK new tax year 2025: All the winners and losers including pensioners, workers and home buyers

The new tax year is fast approaching, and along with it are some major money changes – so who are the winners this year?

The tax year runs differently from the normal year. Instead of going from January to December, it always starts on April 6 and ends on April 5 the following year. The tax year is important as most tax allowances and reliefs run during it, and these can affect everything from your savings to your pension.

Last year’s Autumn Budget saw Rachel Reeves make some big announcements, which are set to be introduced from April 2025, and with the new tax year just three weeks away, there is a raft of changes coming that you should be aware of. Sarah Coles, head of personal finance at Hargreaves Lansdown, has highlighted some of the winners and losers in this year’s new tax year – noting exactly which new rules will impact them and how people can protect themselves.

She said: “It’s unlikely to be a happy new tax year, because far more people risk missing out as the clock ticks forward into the new year than stand to gain from any changes being introduced. The most striking squeeze is likely to come from something that’s not changing at all – as income tax thresholds remain stuck for yet another year. It means the new tax year will usher in new challenges for all sorts of people, but while there’s nothing we can do to stop it, you can protect yourself from the impact of some of the changes.”

New tax year losers

Employers – and their employees

One of the major tax hikes from the Autumn Budget last year was the increase to employer’s National Insurance rates. In October 2024, Chancellor Rachel Reeves announced the rate of National Insurance paid by firms will rise from 13.8% to 15% from April 2025. The earnings threshold for when employers start paying National Insurance will also be lowered from £9,100 per year to £5,000. This means as well as paying a higher rate of National Insurance, businesses will also start to pay it on a higher portion of employee salaries.

Coles noted that the move would make it “more expensive” to employ people and while some businesses will take a hit to the bottom line, others will let staff go. She added: “Some may wear the cost for now, but choose not to bring in pay rises as quickly as they otherwise might.

Taxpayers overall

Personal tax thresholds have been frozen until 2028, and this basically translates to a real terms tax increase for many as they have remained at the same level since the 2021-22 tax year. The 2025-26 income tax rates are:

• Basic Rate: applied at 20% to taxable income up to £37,700
• Higher Rate: taxed at 40% on the next slide of income over £37,700
• Additional Rate: charged at 45% on income above £125,140

Coles said: “It also means every pay rise will push more people over these thresholds, where they will pay higher rates of tax. It’s not just the tax on earnings that’s affected. When you start paying higher rate tax, your personal savings allowance shrinks, from £1,000 for basic rate taxpayers to £500 for higher rate taxpayers, and disappears altogether for additional rate taxpayers.”

Investors with assets outside pensions and ISAs

Coles highlighted that this was the first full tax year with higher capital gains tax rates on stocks and shares – which rose from 10% to 18% for basic rate taxpayers and 20% to 24% for higher and additional rate taxpayers. She said: “To add insult to injury, this comes after the previous government took a scythe to the tax-free allowances. It means more people will pay this tax at a higher rate.”

There are ways you can protect yourself against capital gains and dividend tax, and this is by investing in a stocks and shares ISA. Coles explained: “If you have existing investments outside an ISA and the available allowance, you can use share exchange (Bed and ISA) to move them into the ISA and protect them from tax. Take care not to exceed your capital gains tax annual allowance of £3,000 in the process though.

“If you’re married or in a civil partnership and your partner pays a lower rate of tax, you can transfer income-producing assets into their name. It means you can both take advantage of your tax allowances.”

Home buyers

April 1 will see the end of the Stamp Duty Tax holiday. Stamp duty is a tax that sometimes has to be paid when you buy a property. It all depends on how much the property is worth, if you’re a first-time buyer, and if the property you’re buying will be your main home, or if you’re purchasing is a second home.

Under current rules in England and Northern Ireland, you have to pay stamp duty if your property is your only residence and is worth over £250,000. If you’re a first-time buyer in England and Wales, you start to pay stamp duty if the property you’re buying is worth over £425,000.

From April 1, the stamp duty threshold for first-time buyers will fall from £425,000 to £300,000 – and the maximum price of a property benefiting from this discount will fall from £625,000 to £500,000. Meanwhile, for second steppers and beyond, the threshold will fall from £250,000 to £125,000.

Non-doms

From April 1, non-dom status will no longer be part of the tax system in the UK. If you lived outside the UK for at least 10 years, there will be a four-year exemption period, but after that, all your earnings outside the UK will be subject to tax here. Coles added: “Among other things, it removes a significant inheritance tax break for those who have been in the UK for 10 of the last 20 years.”

Tax Credit claimants

The DWP is currently working to scrap six legacy benefits and move everyone onto Universal Credit. These benefits include: Working Tax Credit, Child Tax Credit, Income-based Jobseeker’s Allowance (JSA), Income support, Housing Benefit, and Income related Employment Support Allowance (ESA). The first legacy benefit to be axed is Tax Credits which will be closed for good in April this year.

Those claiming are being moved over through its Managed Migration programme. As part of the process, households claiming legacy benefits are being sent letters called “migration notices” through the post. All Tax Credit claimants should have received a Migration Notice by the end of last year. Once you have received a managed migration notice, you have three months to claim Universal Credit – you will not be moved over automatically. If you have yet to put in a claim for Universal Credit, your Tax Credit payments will stop altogether from April.

The DWP claims 55% of people will be better off on Universal Credit, and 35% would be worse off. The rest will see no change. If your new Universal Credit payments are going to be less than what you currently get on Tax Credits – and you have made an application before the deadline – then you’ll be awarded “transitional protection” which is an extra amount which tops up your Universal Credit to bridge any shortfall. The transitional protection lasts until there is no difference between the amount awarded under Universal Credit and what you received before under legacy benefits.

New tax year winners

State pensioners

State pensioners will receive an uplift to their monthly payments from April, which will give some of them an extra £460 a year. The state pension is subject to an annual rise each year under the triple lock promise. This ensures it increases by either inflation (based on the previous September’s figure), wage growth (average increase between May and July), or 2.5% – whichever is the highest. It was confirmed by the Chancellor last year that state pension payments will be boosted by wage growth – which sat at 4.1% – from next month.

The basic state pension will increase from £169.50 to £176.45 per week, while the full new state pension will rise from £221.20 to £230.25 per week. Over the course of a year, the basic state pension will go from £8,844 to £9,198 – so a lift of £353 – and the new state pension is going from £11,502 to £11,975 – so a rise of £461 a year.

However, it’s very important to note that as the state pension is rising, the income tax bands remain frozen. This means if you have extra income on top of your state pension – such as a private pension – you may need to pay tax on your retirement savings.

Benefit claimants

Alongside state pensioners, benefit claimants will also see an uplift in payments from April – although by not as much. Universal Credit, Personal Independence Payments (PIP), Attendance Allowance, and other Department for Work and Pensions (DWP) benefit payment will be rising by 1.7% from the new tax year.

Universal Credit is made up of a standard allowance, which is the basic amount you get before any additional elements. For someone who is single and under the age of 25, the standard allowance is rising from £311.68 a month to £316.98 a month. If you’re single and aged 25 or over, the standard allowance is going up from £393.45 a month to £400.14 a month. Joint claimants who are both under 25 will see their standard allowance rise from £489.23 a month to £497.55 a month. If one or both of you are 25 or over, the standard allowance will go up from £617.60 a month to £628.10 a month. You can find our full explainer on how much each individual benefit is rising in this article here.

Lower earners

Workers on the Minimum Wage will see a boost from April as wages are rising by 6.7%. Labour says the move will give full time workers earning the main minimum wage rate an extra £1,400 a year. The minimum wage is how much a business has to pay their employees by law, depending on your age.

The minimum wage for workers above the age of 21 is known as the National Living Wage, while anyone under the age of 21 is paid the National Minimum Wage. The minimum wage will increase to the following rates, depending on your age:

• 21 and over: £11.44 an hour to £12.21 an hour
• 18 to 20: £8.60 an hour to £10 an hour
• Under 18: £6.40 an hour to £7.55 an hour
• Apprentice: £6.40 an hour to £7.55 an hour