April 2025 Tax Changes: Winners And Losers – Impact On Pensioners, Workers, And Home Buyers

As the new tax year begins in April 2025, significant tax adjustments will come into effect, affecting millions of individuals, including pensioners, workers, and home buyers. With changes to National Insurance, capital gains tax, and Universal Credit, some will benefit, while others may face financial challenges.

Understanding the April 2025 Tax Changes

Unlike the standard January-to-December financial year, the UK tax year runs from April 6 to April 5 of the following year. This means that any adjustments made in the previous Autumn Budget will start impacting taxpayers this April. Chancellor Rachel Reeves’ Autumn Budget 2024 introduced several key changes, many of which will now take effect.

Sarah Coles, a financial expert at Hargreaves Lansdown, has highlighted the most significant tax changes for 2025, revealing which groups stand to gain and which will be financially burdened. According to her, the biggest challenge comes from the freeze on personal tax thresholds, which has been extended until 2028.

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Major Changes in National Insurance and Personal Tax

One of the most impactful changes from the 2024 Autumn Budget is the increase in employer National Insurance contributions. As of April 2025:

Employer National Insurance will rise from 13.8% to 15%.
The earnings threshold for employer contributions will drop from £9,100 to £5,000.

This means businesses will have to pay more in National Insurance, which may lead to job cuts or lower wage increases for employees.

Additionally, personal tax thresholds will remain frozen until 2028, meaning:

Any salary increase could push workers into a higher tax bracket.
Higher tax rates will affect savings, reducing tax-free personal savings allowances.
Capital gains tax on investments has increased, with rates rising from 10% to 18% for basic rate taxpayers and 20% to 24% for higher earners.

Stamp Duty Tax Holiday Ends for Home Buyers

From April 1, 2025, the Stamp Duty Tax Holiday will come to an end, meaning:

First-time buyers will only receive relief on properties worth up to £300,000 (previously £425,000).
The maximum property price eligible for discounts will drop from £625,000 to £500,000.
The general Stamp Duty threshold will decrease from £250,000 to £125,000 for those moving up the property ladder.

This change will result in increased costs for home buyers, particularly those purchasing their first property.

Changes for Non-Domiciled Residents

From April 2025, non-domiciled (non-dom) status will be eliminated from the UK tax system. Key points include:

Individuals who have lived outside the UK for at least ten years will receive a four-year exemption.
After four years, worldwide income will be taxed in the UK.
Inheritance tax benefits for non-doms will also be removed.

Universal Credit and Tax Credit Changes

The Department for Work and Pensions (DWP) is phasing out six legacy benefits in favor of Universal Credit, including:

Working Tax Credit
Child Tax Credit
Income-based Jobseeker’s Allowance (JSA)
Income Support
Housing Benefit
Income-related Employment Support Allowance (ESA)

Tax Credits will be permanently closed in April 2025. Those transitioning to Universal Credit must apply within three months of receiving a migration notice or risk losing payments. While 55% of claimants will see financial benefits, 35% may experience a reduction in benefits.

Winners of the New Tax Year: State Pensioners and Minimum Wage Workers

State Pension Increases

The State Pension Triple Lock remains in place, ensuring pension payments increase based on the highest of three factors: inflation, wage growth, or 2.5%. In April 2025, pensions will rise by 4.1%, meaning:

The basic state pension will increase from £169.50 to £176.45 per week.
The full new state pension will rise from £221.20 to £230.25 per week.
Over the year, pensioners will receive an additional £460.

Universal Credit and Benefit Increases

Universal Credit and other DWP benefits will increase by 1.7% in April 2025:

Single claimants under 25 will receive £316.98 per month (up from £311.68).
Single claimants over 25 will receive £400.14 per month (up from £393.45).
Couples where both are over 25 will receive £628.10 per month (up from £617.60).

Minimum Wage Boost

Lower-income workers will benefit from a 6.7% increase in minimum wages, providing full-time workers with an additional £1,400 per year.

The National Living Wage for those 23 and over will rise.
Wage increases will apply across age groups and apprentices.

How to Protect Yourself from Tax Changes

With the April 2025 tax changes impacting various financial aspects, here are some strategies to minimize tax burdens:

Use an ISA: Investing in a Stocks and Shares ISA can protect savings from capital gains and dividend taxes.
Utilize Spousal Transfers: If you are married or in a civil partnership, transferring income-producing assets to a lower-taxed partner can reduce overall tax liabilities.
Claim Allowances: Make sure to maximize tax-free allowances such as the Capital Gains Tax Allowance (£3,000).

Final Thoughts on the April 2025 Tax Changes

The upcoming tax changes will have wide-reaching financial impacts, with pensioners and minimum wage workers among the primary winners, while home buyers and business owners face additional costs. As personal tax thresholds remain frozen, it is crucial to plan ahead and explore tax-saving strategies to mitigate potential financial burdens. Keeping up with these changes will ensure that individuals and businesses can make informed financial decisions in the 2025 tax year and beyond.