With the start of the next tax year on April 6, savers and investors received a whole year of new allowances. The 2025-6 tax year also brings some more unwelcome changes for taxpayers, companies and potential homebuyers.
The new 15% rate of National Insurance employer contributions, which kicked in on April 6, is likely to be the biggest tax change for the coming year. This was trailed in the Oct. 30 Budget, which also brought in immediate increases to capital gains tax.
These tax increases also come at time when UK bills have already increased on April 1. Many council tax bills are increasing above the rate of inflation, and the Ofgem energy price cap has been increased for the April-to-June 2025 period. Water bills are also increasing. Many broadband, phone, and TV packages increased at the start of April.
This is at a time when inflation is still above target at 2.8% and is forecast to rise again above 3% by the Bank of England.
The tax burden, which was already the highest since the 1940s, is set to hit a new record, the Office For Budget Responsibility said at the Spring Statement at the end of March.
The OBR forecast that tax as a percentage of GDP will hit an historic high in the current parliament to a record 37.7% in the 2027-28 tax year. Bringing pensions into the inheritance tax regime will also kick in that tax year.
Last October’s Autumn Budget plays a significant role.
“The sharp forecast increase in 2025/26 is largely due to the Autumn 2024 Budget increase in employer National Insurance Contributions, which take effect in April 2025, and an expected recovery in capital tax receipts,” the OBR said.
National Insurance: Employers Hit
At her first Budget in October last year, Chancellor Rachel Reeves announced the rate of employer National Insurance would rise to 15% from 13.8%. The so-called “secondary threshold”—the level of earnings after which employers must pay secondary Class 1 National Insurance contributions—will also reduce to £5,000 from £9,100.
The change has already led to several big businesses publicly announcing they will be hit hard by the increase. Supermarket company Sainsbury’s SBRY has said the change will cost it £140 million. The costs were reportedly a consideration in its plan to cut 3,000 jobs and close its remaining supermarket cafés. Retailer Marks & Spencer MKS and telecommunications firm BT BT.A have likewise hinted it might force them to increase their prices.
This isn’t the only costs increase employers are shouldering. From April 6, changes to the National Living Wage mean people aged 21 and over will get a 6.7% pay increase to £12.21 per hour from £11.44 and 18-to 20-year-olds will receive an uplift of £1.40, to £10 per hour from £8.60.
Stamp Duty Land Tax: First-Time Buyers Hit
Stamp duty is paid by home buyers when they purchase a freehold property, a new or existing leasehold property, or a property via a shared ownership scheme. From April 1, the nil-rate band was lowered to £125,000, so only purchases below this will be stamp-duty free. A property bought for between £125,001 and £250,000 will now attract 2% stamp duty. The threshold at which the tax is paid by first-time buyers will also fall: to £300,000 from £425,000. The stamp duty regime has in previous years allowed temporary “holidays” to boost housing demand.
You might think the rapidly closing window of opportunity to buy a house on the lower rate would have caused a spike in demand and sent prices racing, but that’s hard to see in the data so far. According to Nationwide, which is one of several lenders to measure the prices of houses sold using mortgages, house price growth in March was 3.9%, the same as that seen in February.
Furnished Holiday Lets Rules Changed
Take note if you rent out a furnished holiday home. From April 6, income for individuals from furnished holiday lets won’t get special tax treatment. Income paid to companies and trusts changed on April 1.
Compared with residential rental properties, furnished holiday lets get preferential tax treatment. Under current rules, they are exempt from finance cost restriction rules, get access to reliefs from taxes on chargeable gains, and get more beneficial capital allowance rules than residential landlords.
Under the new framework, finance cost restrictions will change to restrict loan interest to the basic rate of income tax. Owners of furnished holiday lets also won’t get tax relief on chargeable gains for trading business assets. The income they make will also be disqualified from inclusion in relevant UK earnings when they calculate their maximum pension tax relief.
The government says the change “promotes fairness by removing the tax advantages that furnished holiday let landlords have over other residential landlords.” It also says the policy will net £715 million in extra tax receipts.
Non-Dom Status Abolished and Redesigned
Changes to the system of taxing non-domiciled (or “non-dom”) individuals took effect on April 6. They are not actually the direct result of the Labour Budget. Rather, they are a policy previously announced by Jeremy Hunt at the final Conservative Budget before the 2024 general election.
Kept by the incoming administration, they mean that the “remittance basis” for UK non-doms will be abolished in favor of a residence-based regime. In practice, however, there is a transition period. Individuals affected by the changes will not pay UK tax on foreign income and gains for the first four years of tax residence in the UK. The government will also amend inheritance tax rules for this group of people.
James Gard contributed to this story
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.
