Get Ready for the End of the Tax Year: What to Know for 2025
As we approach the end of this tax year, it’s a good opportunity to review what you’ve achieved financially in 2024 and prepare to make the most of the opportunities available before the 5 April deadline.
With new tax rules, shifting allowances, and changes to regulations coming into effect in 2025, there’s a lot to consider—but it’s also a chance to ensure your financial future starts on the right foot.
So, whether you’re thinking about maximising your ISA, contributing to your pension, or navigating new tax changes, here’s everything you need to know to make this tax year-end your most prepared yet.
Looking Back at 2024: Setting the Stage for 2025
2024 was a year of transition and adjustment. Inflation finally fell below the Bank of England’s 2% target, prompting interest rate cuts that offered some relief to borrowers. Meanwhile, Labour’s new Chancellor, Rachel Reeves, introduced a series of tax changes that will come into full effect in 2025. These shifts—combined with evolving economic conditions—are already influencing financial planning strategies.
It’s worth noting that the consultation process for Inheritance Tax on pensions has now ended, with the government seeking input from 30 October 2024 to 22 January 2025 on how the new tax changes will be implemented for UK pension schemes. Following this, the government will publish a response and conduct further consultations on draft legislation in 2025. These shifts—combined with evolving economic conditions—are already influencing financial planning strategies.
Tax Changes Taking Effect in April 2025
Several key tax changes are coming into effect as the new tax year begins on 6 April 2025. Here’s a summary of what to expect:
- Electric Vehicle Tax: For the first time, electric vehicles will be subject to vehicle tax, aligning with petrol and diesel vehicles.
- Stamp Duty Updates: From 1 April, the zero-rate threshold for stamp duty will drop to £125,000 (previously £250,000). Properties valued between £125,001 and £250,000 will now face a 2% stamp duty rate.
- Non-Dom Regime Reforms: The non-UK domiciled tax regime will be replaced with a residence-based system. While existing non-doms will need advice to navigate the changes, new residents will benefit from a four-year exemption on foreign income and gains.
- Employers’ National Insurance Contributions: Businesses will see an increase in the main rate of employers’ NICs, rising from 13.8% to 15%.
- Carried Interest Tax Increase: The tax on carried interest returns for private equity professionals will rise from 28% to 32%.
Good News: Pension Boosts and Lower Inflation
It’s not all about rising taxes. There’s good news for retirees, with the state pension increasing by 4.1%. From April, the full new state pension will rise to £230.25 per week, adding up to an extra £470 per year.
Meanwhile, with inflation under control, interest rates are expected to continue their gradual decline, providing relief for borrowers and mortgage holders. However, savers may need to adjust their strategies to make the most of this lower interest environment.
Make the Most of Your Allowances
As tax rises take effect, it’s more important than ever to take full advantage of the allowances available to you. Here are some key opportunities to consider:
- ISAs: Maximise your annual ISA allowance to shield savings and investments from tax.
- Pension Contributions: Contributions to your pension not only grow tax-free but may also benefit from tax relief.
- Capital Gains: Use your annual capital gains tax allowance wisely to minimise liabilities.
- Gifting: The gifting allowance can be a valuable tool for reducing inheritance tax.
If you’re unsure how best to use these allowances, speaking with a financial planner can help you make the most of your options.
What’s Next? Stay Prepared
With 2025 shaping up to be a pivotal year for personal finances, staying proactive is key. From understanding how new taxes might affect you to planning for future opportunities, now is the time to review your financial plan.
End-of-tax-year planning doesn’t have to be stressful. By taking a few simple steps, you can ensure your finances are in the best possible shape. Whether it’s reviewing your savings strategy, making pension contributions, or seeking advice on upcoming changes, don’t leave it until the last minute.
If you’d like tailored advice or have questions about how these changes might impact you, get in touch with your financial planner today.
Final Thoughts
The end of the tax year offers a valuable opportunity to take control of your financial future. With careful planning, you can navigate the changes ahead with confidence and clarity. Let’s make 2025 a year of smart financial decisions!