If you are planning to buy an additional property or sell assets such as a business next year, you may owe more to the taxman than in previous years.
Wealthy households and property investors face higher tax bills in 2025.
It comes as the first Budget from chancellor Rachel Reeves in October unveiled a range of tax hikes and continued with freezes to personal allowances that were introduced by the previous Tory government.
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All this will essentially push up tax bills, even if the rates haven’t explicitly risen.
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Research by interactive investor suggests that a combination of curbs to capital gains (CGT) and dividend allowances as well as higher CGT rates mean middle earners will see their tax bill rise by £1,261 next year.
The figure rises to £1,831 for someone earning £50,000 and £3,836 for those earning £100,000.
Here are the taxes that are going up in 2025.
Frozen income tax thresholds
The previous Conservative government announced in 2021 that income tax allowances would be frozen until 2028.
Reeves has continued with that policy. While this isn’t a tax hike, the risk is that this creates fiscal drag as people are moved into higher tax bands faster than usual as their pay rises.
The Office for Budget Responsibility’s October 2024 economic and fiscal outlook suggests that from 2027-28 onwards, more than four million additional taxpayers will brought into tax due to the threshold freezes, resulting in the number of taxpayers surpassing 40 million for the first time
Rachael Griffin, tax and financial planning expert at Quilter, said: “As wages grow in line with inflation, static tax thresholds will continue to drag more and more individuals into higher tax brackets until the end of the freeze and beyond, a phenomenon known as fiscal drag. For millions of middle-income earners, this means paying a higher proportion of their income in tax without seeing any real increase in their purchasing power.”
Griffin said this freeze will continue to hit middle-income households the hardest, particularly those who are just nudged into the higher-rate tax band.
She added: “Many of these workers are far from affluent, but they are facing tax rates more typically reserved for higher earners.
"At a time when inflation continues to erode real wages and the cost of living remains high, households will continue to take a hit on their disposable incomes.
"Families will feel the pinch, and many will struggle to maintain their living standards as more of their income is taxed at higher rates.”
Capital gains tax changes
The capital gains tax rate was increased in the Autumn Budget from 10% to 18% for basic rate taxpayers and from 20% to 24% for higher and additional rate taxpayers.
This kicked in the day after the Budget, on 31 October, but 2025 will be the first full year where households face the impact of the change.
Sarah Coles, head of personal finance for Hargreaves Lansdown, said: “For those couples who manage their finances to ensure the lower earner pays any capital gains tax, it’s a particularly harsh blow, because the rate for these taxpayers has risen more than for higher earners.”
Inheritance tax (IHT) rates have been held but the £325,000 nil-rate band – the amount an estate can be worth before IHT is payable- is to be frozen for an extra year until 2029.
Alternative investment market shares will no longer be exempt from IHT from April 2025 but the tax rate will be halved to 20%, while pensions are set to form part of estates for IHT purposes from 2027, changing how people plan their finances.
Farmers and land investors are also set for higher tax bills.
From April 5 2026, agricultural and businesses assets will only qualify for 100% relief up to a cap of £1 million per person, over and above the nil-rate band, or up to £500,000 where eligible for the residence nil rate band as well.
Above the £1 million cap, relief on eligible assets will apply at a rate of 50%, meaning effectively IHT will be charged at 20%.
Emma Sterland, chief financial planning director at Evelyn Partners, suggests sharing allowances and assets with a spouse as transfers can be made tax-free while you can also reduce your IHT bill by gifting.
She says: “Could you start making regular gifts using the ‘normal expenditure out of surplus income’ exemption? Could you use your own pension savings to start or boost the pension of a loved one, which would benefit from tax relief at their marginal rate?
“All these questions have been given extra urgency by the Budget changes to IHT rules and reliefs, and those who would currently benefit from the more generous business and agricultural property reliefs must have a big rethink with the help of an adviser whether their current plans are fit-for-purpose.”
Stamp duty costs
The Budget also increased the additional stamp duty rate from 3% to 5% making it more expensive for investors to purchase additional properties.
But another stamp duty change is coming in April.
Stamp duty thresholds are set to drop in April, adding to costs for buyers.
First-time buyer stamp duty relief will drop from £425,000 to £300,000 and home movers will start paying the controversial property tax at £125,000 instead of £250,000 currently.
Property website Zoopla estimates that 83% of homebuyers currently looking for a home will pay more Stamp Duty from April 2025, up from the 49% of potential purchasers now.
Estate agents are predicting are rush among buyers to complete purchasers before the April deadline, or sellers may have to accept lower offers to offset the rise in property tax.
Higher employer national insurance rates
The government may have kept its pledge to not explicitly raise income tax, employee national insurance and VAT.
But from 6 April 2025, the rate of employers' national insurance contributions will rise from 13% to 15%, while the level at which employers start paying NICs for each employee will fall from £9,100 to £5,000.
Critics warn these costs will be passed on through limited pay rises and higher prices for items.
Laura Suter, director of personal finance at AJ Bell, said: “The smallest businesses will be protected from some of these cost increases, as the Employment Allowance will more than double from £5,000 a year – meaning they can claim back up to £10,500 a year on their National Insurance bill. This will also be extended to all businesses, providing some respite for employers.
“But regardless of this tax break, the move will raise huge sums for the government – netting them £26 billion by the 2029/30 tax year. However, £5 billion of that will come from the public sector wage bill, offsetting some of the impact.
“While these measures are a cost increase for many businesses, it will inevitably hit the British public in their pockets as companies pass on those costs. Whether that’s lower pay rises for staff, cuts to future hiring or businesses passing on cost increases to customers.
Council tax increases
Council tax isn’t technically under central government’s control although the previous Tory regime did lift the limits on how much town halls can increase bills by.
Local authorities have the right to raise bills by 4.99% without holding a referendum.
Coles added: “Given that so many local governments have been struggling to make ends meet, it’s likely that an awful lot of them will opt for the biggest possible increase.”
