Key Changes for the 2025/2026 Tax Year You Need to Know
March 24, 2025
It’s that time again—when a new tax year begins and brings with it a host of changes and updates to tax regulations.
Key Changes that will directly affect your take home pay
1. Student Loan Threshold Changes
The repayment thresholds for student loans has been increased, which means your repayment amount will decrease.
| Plan Type | Rate | 2024 Threshold | 2025 Threshold |
|---|---|---|---|
| Plan 1 | 6% | £24,990 | £26,065 |
| Plan 2 | 6% | £27,295 | £28,470 |
| Plan 4 | 6% | £31,395 | £32,745 |
2. Changes to child benefit
The rate of child benefit will rise by 1.7%. That will mean families with one child will receive £26.05 a week for the first or only child and £17.25 a week for other children. Child benefit tax thresholds remains unchanged.
| 2024 Rate | 2025 Rate | |
|---|---|---|
| First child | £1,331.20 | £13,54.60 |
| Additional child | £881.40 | £897.00 |
3. Changes to Scottish Tax Bands
Although the tax rates for Scotland remain unchanged, there have been updates to the thresholds, which means you will pay less income tax. Particularly beneficial if you are a low earner.
| Band | Rate | 2024 Tax Band | 2025 Tax Band |
|---|---|---|---|
| Scottish Starter Rate | 19% | £12,571 to £14,876 | £12,571 to £15,397 |
| Scottish Basic Rate | 20% | £14,877 to £26,561 | £15,398 to £27,491 |
4. National Minimum Wage (NMW) and National Living Wage (NLW) Increases
As announced in the Autumn Budget, the National Minimum Wage will rise on April 6, 2025. The new rates are as follows:
| Age Group | 2024 Hourly Rate | 2025 Hourly Rate |
|---|---|---|
| 21+ | £11.44 | £12.21 |
| 18-20 | £8.60 | £10.00 |
| Under 18 | £6.40 | £7.55 |
| Apprentice | £6.40 | £7.55 |
To calculate your take home pay with customized values, please use our tool here.
Other Key Changes
1. Statutory Leave Rates
From April 2025, statutory pay rates will also increase. Here are the new weekly rates for statutory maternity, paternity, sick pay, and other entitlements:
| Statutory Payment | Change | Rate |
|---|---|---|
| Statutory Paternity Pay | Increase | £187.18 |
| Statutory Maternity Pay | Increase | £187.18 |
| Shared Parental Pay | Increase | £187.18 |
| Statutory Sick Pay (SSP) | Increase | £118.75 |
2. National Insurance Threshold Changes
Several National Insurance thresholds will also change in April:
| Threshold | Change | Monthly | Annual |
|---|---|---|---|
| Lower Earnings Limit (LEL) | Increase | £542 | £6,500 |
| Primary Threshold (PT) | No Change | £1,048 | £12,570 |
| Secondary Threshold (ST) | Decrease | £417 | £5,000 |
| Upper Earnings Limit (UEL) | No Change | £4,189 | £50,270 |
| New Investment Zone Threshold | New | £2,083 | £25,000 |
3. Employer Class 1 National Insurance Rate Increase
Starting in April 2025, the employer’s Class 1 National Insurance rate will increase by 1.2 percentage points, from 13.8% to 15%. This change will apply from the first pay date on or after April 6.
4. New Employment Allowance
The Employment Allowance will increase significantly, rising from £5,000 to £10,500 per year. The eligibility criteria are also being relaxed.
5. Small Employer’s Relief Increase
The rate for Small Employer’s Relief will increase from 103% to 108.5%, giving small businesses more compensation.
6. New Laws Coming in 2025
Several new laws and proposals will affect businesses in 2025:
- Paternity Leave (Bereavement) Act 2024: Expected to give bereaved partners a ‘day one’ right to paternity leave.
- Draft Equality (Race and Disability) Bill: A bill aiming for equal pay and reporting of ethnicity and disability pay gaps for businesses with over 250 employees.
- Right to Disconnect: A new law being introduced to give employees the right to disconnect from work outside working hours.
7. The Employment Rights Bill
This significant piece of legislation will propose sweeping changes to employment rights, including:
- Abolishing the two-year qualifying period for unfair dismissal protection.
- Day one rights for parental and bereavement leave.
- Stricter regulations around zero-hour contracts, ‘fire and rehire’ practices, and flexible working.
Many of these changes won’t take effect until 2026, but businesses should stay informed and participate in consultations when possible.
8. Capital Gains Tax increase
Capital gains tax (CGT) is charged on the profits made from selling assets, such as investments or valuable possessions.
At the Autumn Budget it was confirmed that CGT would rise with immediate effect from 10% to 18% for basic rate taxpayers, and from 20% to 24% for higher and additional rate taxpayers. Remember, that gains can also be offset against losses made when selling other assets, so it is important to retain records when selling items which may attract capital gains or losses.
9. Council tax to rise
Council tax is set to rise again in April 2025, with local authorities in England permitted to increase bills by up to 5%.
The average band D council tax in England for 2024/25 was £2,171, according to Government figures, so this could mean a rise of £109 in council tax.
10. Road tax increases and electric car exemption to end
Significant changes to car tax rates will also take effect from April, particularly affecting new vehicle purchases.
Starting in April 2025, electric vehicle (EV) owners will no longer be exempt from Vehicle Excise Duty (VED), commonly known as road tax. Currently, EVs are free from this charge, but a new rate structure will see them pay a first-year rate of £10. Additionally, EVs priced over £40,000 will face the Expensive Car Supplement, which currently stands at £410.
Meanwhile, new cars emitting between 1-50g/km of CO2, including hybrids, will see tax rise from £10 to £110. Vehicles emitting 51-75g/km of CO2 will face increases from £30 to £130, while rates for cars emitting 76g/km and above will double. At the top end, cars emitting over 255g/km of CO2 will see first-year rates double from £2,745 to £5,490.
11. Increases in tobacco and alcohol duty
From 30 October 2024, tobacco duty has risen by the Retail Price Index (RPI) measure of inflation plus 2%. Duty on hand-rolling tobacco has risen by RPI plus 10%.
Alcohol duty rates on non-draught products including wine, spirits and bottled beer will increase by 2.7% from 1 February 2025. However, duty on draught alcohol served in pubs, bars and restaurants will decrease by 1.7%.