5 Tax Changes in 2025

Tax rules are shifting again. If you’re not keeping up, you could be missing out.

2025 brings some major updates that could hit your payslip, your savings and even your family budget. Whether you’re working in construction, oil and gas, the military or running your own business, it’s worth understanding what’s changing and how it affects you.

Some changes are small but sneaky. Like the ones that quietly take a bigger bite out of your pay. Others could have a big impact on the way you plan your money, especially if you’ve got a family or investments. And let’s be honest, tax talk isn’t always the easiest to follow.

That’s where RIFT comes in. We’re here to make tax simple. We’ve helped thousands of people like you claim back what they’re owed and we can help you stay ahead of the latest HMRC tax rules in 2025.

Want to know how the changes hit your bottom line? Use our Income Tax calculator to see what they mean for you.

1) What's changing with Income Tax in 2025

The personal allowance in 2025 is staying frozen at £12,570 and the Income Tax Bands aren't moving either:

That might sound like nothing’s changed, but don’t be fooled.

Thanks to rising wages, more people are being pulled into higher tax bands, even if they haven’t had a real boost in income. This is called fiscal drag and it means HMRC takes a bigger cut, even if your pay only keeps pace with inflation rather than boosting your real income. Here’s how it works:

• If you earn £30,000, your personal allowance still covers the first £12,570. The rest (£17,430) is taxed at 20%. That’s £3,486 in Income Tax.
• If you earn £60,000, you’ll pay:
  • 20% on £37,700 (£7,540)
  • 40% on the £9,730 above the higher-rate threshold (£3,892)
  • That’s £11,432 in Income Tax and you haven’t even crossed into the top band yet.

Over time, this freeze means your take-home pay buys you less, while more of what you earn goes to the taxman.

Check the Income Tax thresholds in the table above and check your payslip from April 2025. If your tax code hasn’t changed but your deductions have gone up, this is probably why.

Read more on personal allowances

2) National Insurance rate changes

National insurance has changed again in 2025 and whether you're self-employed or on PAYE, it's worth a closer look.

For PAYE workers and employers

While employee rates stay the same (after cuts in 2024), it’s the employer National Insurance rate that’s shifted. That means if you run a business or hire staff, you could be paying more on top of salaries.

For most employees, nothing changes day to day but rising wage bills could hit bonuses, overtime or job offers. It’s worth knowing what your boss is dealing with behind the scenes when it comes to National Insurance in 2025.

Free national insurance calculator

For self-employed workers

2025 marks a big shake-up for self employed NIC:

• Class 2 NICs – Scrapped completely from April 2024. If you’re earning enough, you’ll still get pension credits with no extra form-filling needed.
• Class 4 NICs – Staying at 8% on profits between £12,570 and £50,270, which is down from 9% in 2023. Above that, you’ll pay 2% as before.

So, if your profits are around £40,000, you could save around £400 a year compared to old rates. But you still need to keep an eye on your payments, especially if you dip below the threshold and want to protect your pension.

If you’re self-employed, review your Class 4 NIC payments carefully. Even a 1% cut can mean hundreds back in your pocket. To see what you might owe, use our self-employed tax calculator.

3) Capital Gains Tax changes in 2025

Got a second property, shares or investments outside an ISA? Then you need to know about the 2025 Capital Gains Tax (CGT) changes.

The annual CGT allowance is the amount of profit you can make before paying tax. This has been cut from £6,000 in 2024 to just £3,000 from April 2025.

That means you’ll pay tax on more of your gains, even if you’ve only sold a few shares or cashed in a small investment. So, now you’ll pay:

• 18% CGT if you’re a basic rate taxpayer.

• 24% CGT if you’re in the higher rate band (up from 20%).

Let’s say you sell a second home and make £25,000 profit:

• Subtract the £3,000 allowance = £22,000 taxable gain.

• If you’re a higher-rate taxpayer, that’s a £5,280 tax bill – £880 more than under the old 20% rate.

If you want to avoid high CGT, consider using ISAs or pensions to shelter investments before selling. It’s a smart move to keep more of your money.

Free capital gains tax calculator

4) Tax changes for families and households

There are big changes for families who still receive Working Tax Credit or Child Tax Credit. Since April 2025, both have been fully replaced by Universal Credit and anyone still on the old system will be moved over.

If you haven’t transitioned yet, now’s the time to get ready. Universal Credit works differently, so your payments might change depending on income, savings and household setup. This is how it works:

• If you’re on tax credits and have two children, your support might go up or down under Universal Credit.
• If you’ve got more than two children, you might be affected by the two-child limit.
  Payments are monthly, not weekly, which can make budgeting tricky at first.

What isn’t changing in 2025 includes:

• The child benefit threshold remains at £50,000. If one parent earns more, your benefit could be reduced through the High-Income Child Benefit Charge.
• The marriage allowance still lets you transfer up to £1,260 of your personal allowance to a lower-earning spouse, potentially worth up to £252 back.

Be sure to check your eligibility for Universal Credit early. Don’t wait around, you may be able to avoid gaps in payments or nasty surprises when the switchover happens.

5) Zero-emission vehicles and VED in 2025

If you’re thinking about getting an electric car, this one’s for you. From April 2025, zero-emission vehicles (ZEVs), including fully electric cars, are no longer be exempt from Vehicle Excise Duty (VED), also known as road tax. Here’s what that means:

• New EVs registered after 1 April 2025 will pay the standard VED rate, which is currently £190 a year.
• If your EV’s list price is over £40,000, you’ll also pay the “expensive car supplement”, which is an extra £410 a year for five years.

Let’s say you’re eyeing a Tesla Model Y worth £45,000:

• If you bought one in March 2025, you’d avoid both charges.
• If you buy after April 2025, you’ll pay £600 a year in road tax from year two onwards.

That’s a big shift for drivers who’ve enjoyed tax-free motoring so far.

What to do now to stay ahead

With a number of 2025 tax changes to think about, here’s how to stay on top of things and protect your finances:

• Check your payslips and tax code – Make sure you’re not overpaying or underpaying tax.
• Use your ISA allowance – Shelter savings and investments from capital gains tax.
• Time any asset sales carefully – Consider the CGT changes when selling.
• If you’re on tax credits – Prepare for the move to Universal Credit.
• Running a business? – Review the impact of employer NIC rate changes.
• Self-employed? – Start using digital records to get ready for Making Tax Digital, coming 2026.
• Pay on time – HMRC’s late payment penalties are getting tougher from April 2025.

Remember to get ahead of any deadlines. This means fewer surprises, less stress and you might even be due a refund.

Use our free tax calculators to see what the 2025 tax changes mean for you.

How RIFT can help

Tax changes in 2025 are hitting everything from pay to pensions, benefits to vehicles. But with the right support, it’s easy to stay ahead.

RIFT takes the stress out of tax. We’ll help you understand what’s changing, what it means for you and how to claim back what you’re owed as a tax refund in 2025. Get in touch today to see how we can help you.

Frequently asked questions

What are the new UK tax rules in 2025?

UK tax updates include frozen Income Tax thresholds, new National Insurance rules, reduced capital gains allowances and road tax for electric vehicles. Tax credits are also being replaced by Universal Credit.

Do the 2025 tax changes affect self-employed workers?

Class 2 NICs are now scrapped and Class 4 rates stay at 8%, so if you’re self-employed, you’ll be affected. You’ll still need to report income and keep digital records as Making Tax Digital approaches.

How do the 2025 tax updates impact families?

Working and Child Tax Credits are ending, with Universal Credit taking over. Child benefit thresholds and marriage allowance remain the same.

What happens to electric car tax in 2025?

From April 2025, zero-emission vehicles pay standard road tax (VED) and an extra charge if the car costs over £40,000.

How can I claim a tax refund after the 2025 changes?

Use RIFT’s tax return calculator to check what you could claim back as a tax refund in 2025. We make the process quick, easy and hassle-free.